Question

4. Which of the following would not be considered a cost of holding inventory? a. Preparing a purchase order b. The risk of obsolescence c. Shrinkage (e.g.: shoplifting) d. Interest on capital invested in inventory e. All of the above are considered costs related to holding items in inventory.

Answer 1

Answer:

Option A Preparing a purchase order

Explanation:

Because the reason is that the purchase order preparation is the assignment of the procurement department and is not associated with the holding of the inventory. Whereas obsolescence and skrinkage are the decrease in the value of the inventory which is because of not selling the product before the decrease and are part of cost of holding inventory.