The relevant incremental costs are added into the relevant opportunity cost of capital to calculate ___________?
Correct answer: B. relevant inventory carrying costs
- A. purchase order costs
- B. relevant inventory carrying costs
- C. irrelevant inventory carrying costs
- D. relevant ordering costs
Explanation
Relevant inventory carrying cost includes the opportunity cost of capital tied up in inventory plus other incremental carrying costs, such as storage or insurance. Therefore, these costs are combined to calculate relevant inventory carrying costs.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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