Which of the following cost elements typically would be included in the cost of carrying inventory?
Which of the following cost elements typically would be included in the cost of carrying inventory?
Obsolescence is a cost associated with the carrying of inventory as it refers to items becoming outdated or no longer usable, which directly impacts the value and usability of inventory over time. This means that inventory that becomes obsolete represents a loss of value, and thus contributes to the overall costs of holding or carrying inventory.
CSCP learning book module 2, page 142 said: " the carrying cost include storage costs, capital cost and risk costs. Storage costs include allocations for rent, operating cost, taxes, material-handling costs, lease payments for equipment, deprecation, power costs." I think the correct answer should be B, depreciation of product equipment.
Direct materials is included in landing cost, so no C. Obsolescence itself could be although CSCP learning book lists "RISK of obsolescence" not the materialized obsolescence itself. Hence B (depreciation) is correct answer
obsolescence is a significant factor that directly impacts the value and usability of inventory over time, making it a crucial component of the overall cost of carrying inventory.
Answer should be D - Obsolescence. risk cost consists of write-off or write down due to obsolescence. Depreciation for storage and material handling equipment and assets would be part of storage cost not production equipment depreciation
Why not D?
Storage costs. Storage costs include allocations for rent, operating cost, taxes, material-handling costs, lease payments for equipment, depreciation, power costs, and operating costs. This Storage cost under Caring cost. -CSCP handbook
that's make referece to transport stock (material cost)
I believe the answer is D as well because "direct materials are raw materials that are made into finished products. These are not materials that are used in the production process. Direct materials are goods that physically become the finished product at the end of the manufacturing process."