The total cost of a firm's inventory is found by summing the ________.
A) order cost and the marginal cost of a firm's inventory
B) order cost and the carrying cost of a firm's inventory
C) order cost and the actual cost of a firm's inventory
D) carrying cost and the marginal cost of a firm's inventory

Question

Quizplus · Accepted Answer

The total cost of a firm's inventory consists of the order cost (cost to place an order) and the carrying cost (cost to store the inventory). Therefore, the correct choice is B, as it includes both factors. The marginal cost (cost to produce one additional unit) and the actual cost (the cost the firm paid for the inventory) are not necessary to calculate the total inventory cost.

The Total Cost of a Firm's Inventory Is Found by Summing