Which of the following inventory-related costs typically is used only for decision making?
Which of the following inventory-related costs typically is used only for decision making?
Obsolescence costs are considered primarily for decision-making purposes because they represent the potential loss in value of inventory items due to factors such as technological advancement, market demand shifts, or introduction of newer models. These costs are crucial for businesses to assess when planning for future production, procurement, and inventory strategies, even though they do not directly influence day-to-day inventory management operations.
Obsolescence refers to the decrease in value of an inventory item due to factors like technological advancements, changes in market demand, or the arrival of newer models.
The answer is A. Carrying costs. The APICS Dictionary, 16th edition, defines make-or-buy cost analysis as a comparison of all of the costs associated with making an item versus the cost of buying the item. This cost analysis is typically used only for decision making. Carrying costs are one of the costs associated with inventory management, which includes the cost of holding inventory in stock.
Does anybody have an explanation for this? I feel like it could be A. I think this is a poor question as all costs should be factored in when making decisions. What am I missing?
I feel it is A but not sure