AICPA Exam CPA-Business Topic 3 Question 97 Discussion

Actual exam question for AICPA's CPA-Business exam

Question #: 97
Topic #: 3

[All CPA-Business Questions]

All of the following are inventory carrying costs, except:

AInsurance.

BOpportunity cost on inventory investment.

CObsolescence and spoilage.

DInspections.

Show Suggested Answer

Suggested Answer: D

Choice 'd' is correct. Inspections. Inspections are part of order costs, not carrying costs.

Choices 'a' and 'c' are incorrect. Inventory carrying costs include all costs associated with warehousing (storing) inventory (e.g., storage, insurance, obsolescence, and spoilage associated with holding inventory).

Choice 'b' is incorrect. The economic cost of holding inventory includes the implicit (opportunity) cost of foregoing a return on the money invested in inventory.

by Marlon at Sep 13, 2024, 02:24 PM

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Stanton

2 months ago

Inspections? What, do they think we're just letting the inventory sit there without checking it? That's just common sense, not a carrying cost.

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Alaine

2 months ago

Inspections? Really? That's like saying the electricity bill is an inventory carrying cost. Nah, gotta be option D.

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Edna

25 days ago

C) Obsolescence and spoilage.

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Charlette

28 days ago

B) Opportunity cost on inventory investment.

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Josefa

1 months ago

A) Insurance.

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Fernanda

2 months ago

But inspections are a cost associated with inventory management, not a carrying cost.

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Gladys

2 months ago

I disagree, I believe the answer is A) Insurance.

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Danica

2 months ago

Hmm, I think option D is the odd one out here. Inspections seem more like an overhead cost rather than a direct inventory carrying cost.

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Johnetta

1 months ago

Maybe we should review the definitions of inventory carrying costs to clarify.

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Buddy

2 months ago

I see your point, but I still think option D is the odd one out.

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Olene

2 months ago

I think option C is also a carrying cost because it involves managing inventory levels.

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Helga

2 months ago

I agree, option D does seem like an overhead cost.

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Wilburn

2 months ago

Definitely option D. Inspections are a necessary operational expense, not a cost of carrying inventory. The others, like insurance and opportunity cost, are clearly inventory carrying costs.

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Fernanda

3 months ago

I think the answer is D) Inspections.

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Corrie

3 months ago

I'm pretty sure that inspections are not considered an inventory carrying cost. That's just part of the cost of doing business, not a cost associated with holding inventory.

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Rosita

2 months ago

C) Obsolescence and spoilage.

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Mayra

2 months ago

B) Opportunity cost on inventory investment.

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Diane

2 months ago

A) Insurance.

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