Question

Zanda Corp. and Jones Corp. are identical in every way (products produced, costs, demand, etc.) except for one. Zanda uses a level production plan while Jones prefers a chase production plan.
Which of the following is most likely to be true?

a) Zanda will have higher investment in plant and equipment.
b) Zanda will have lower total production costs.
c) Zanda will have higher inventory carrying costs.
d) Zanda will have higher hiring and firing costs.

Answer 1

Answer: (C) Zanda will have higher inventory carrying costs.

Explanation:

  The inventory carrying cost is one of the type of overall holding inventory cost that helps in identifying the various types of business expenses and also storing the various types of unsold goods and the services in the market.  

The inventory carrying cost is also known as the holding cost and it is basically responsible for handling the cost system by using the estimated formula.

According to the given question, Zanda corporation is basically using the level production plan for the purpose identifying their business factors such as costs, demand and the products.

So, based on the given information is Zanda will have the high inventory carrying cost statement is true. Therefore, Option (C) is correct answer.