The cost of breakage and obsolescence are relevant incremental costs of carrying inventory.

Question

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Breakage refers to the cost of items being damaged or broken while in inventory. Obsolescence refers to the cost of inventory that becomes outdated or unusable. Both of these costs are relevant incremental costs of carrying inventory as they increase the total cost of inventory and should be taken into consideration when determining the optimal level of inventory to carry.

The Cost of Breakage and Obsolescence Are Relevant Incremental Costs