Which of the following reflects the opportunity cost of holding significant inventory?
A)Additional insurance costs
B)The interest forgone on an alternative investment
C)Additional storage costs
D)All of these answers are correct

Question

Quizplus · Accepted Answer

Opportunity cost refers to the cost of forgoing a certain alternative in favor of the current choice. Holding significant inventory can result in the cost of not investing the money elsewhere, which is the interest forgone on an alternative investment. Additional insurance and storage costs are direct costs of holding inventory, but they do not necessarily reflect the opportunity cost. Therefore, option B is the correct answer.

Which of the Following Reflects the Opportunity Cost of Holding