Costing - Study Mode
[#776] If relevant opportunity cost of capital is $2950 and relevant carrying cost of inventory is $6700, then relevant incremental cost will be
Correct Answer
(C) $3,750
Explanation
Solution: Relevant incremental cost = Relevant carrying cost of inventory - Relevant opportunity cost of capital = $6700 - $2950 = $3,750
[#777] Profit forgone by capital investment in inventory rather than investment of capital to somewhere else is classified as
Correct Answer
(D) relevant opportunity cost of capital
Explanation
Solution: Profit forgone by capital investment in inventory rather than investment of capital to somewhere else is classified as relevant opportunity cost of capital.
[#778] An example of shrinkage costs is
Correct Answer
(D) clerical errors
Explanation
Solution: An example of shrinkage costs is clerical errors. Shrinkage is the loss of inventory that can be attributed to factors such as employee theft, shoplifting, administrative error, vendor fraud, damage in transit or in store, and cashier errors that benefit the customer.
[#779] If relevant incremental costs are $5000 and relevant opportunity cost of invested capital is $2500, then relevant inventory carrying costs would be
Correct Answer
(A) $7,500
Explanation
Solution: Relevant inventory carrying costs = Relevant incremental costs + Relevant opportunity cost of invested capital = $5000 + $2500 = $7,500
[#780] . . . . . . . . is the smallest segment of activity or area or responsibility for which costs are accumulated.
Correct Answer
(B) Cost centre