All of the following affect holding costs except:a.insurance costb.storage costsc.obsolescence costd.setup coste.damage cost
Question
All of the following affect holding costs except:
a. insurance cost
b. storage costs
c. obsolescence cost
d. setup cost
e. damage cost
Solution
The answer is d. Setup cost.
Here's why:
a. Insurance cost: This is a part of holding cost because you need to insure the goods that you are holding in the inventory.
b. Storage costs: These are also part of holding costs because you need to pay for the space to store the goods.
c. Obsolescence cost: This is a part of holding cost because if goods are held for too long in the inventory, they may become obsolete.
d. Setup cost: This is not a part of holding cost. Setup costs are the costs to prepare a machine or process for manufacturing. They are not related to holding inventory.
e. Damage cost: This is a part of holding cost because goods held in inventory can be damaged.
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