Holding costs are a linear function of quantity ordered.This means that ______.
A)these costs increase if the quantity ordered increases and decrease as the quantity ordered decreases
B)these costs increase if the quantity ordered decreases and decrease as the quantity ordered increases
C)these costs remain unchanged as the quantity ordered changes
D)these costs have no relationship with quantity ordered

Question

Quizplus · Accepted Answer

Holding costs are costs associated with holding inventory in stock, such as storage costs and obsolescence costs. These costs increase if the quantity ordered increases, as more inventory will need to be stored and potentially become obsolete. Conversely, these costs decrease as the quantity ordered decreases, as there is less inventory to store and a lower likelihood of obsolescence. Therefore, holding costs are a linear function of quantity ordered and increase as the quantity ordered increases.

Holding Costs Are a Linear Function of Quantity Ordered