Your company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day. The value-added costs are a.$5,000. b.$30,000. c.$0. d.$75,000.

Value-added cost is known as the cost incurred on the product before offering it to the customers.The carrying cost is not considered a product cost. Because it does not increase the value of goods. So it should not be counted. The correct answer is c. $0.

Answered: Your company keeps 15 days of materials…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Your company keeps 15 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs average $5,000 per day. A competitor keeps 12 days of inventory on hand, and the competitor's carrying costs average $3,000 per day. The value-added costs are

a.
$5,000.

b.
$30,000.

c.
$0.

d.
$75,000.

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