Question

Which of the following statements are true? Check all that apply. | Overage cost is the total cost of excess inventory at the end of the period. Underage cost is the unit cost of insufficient inventory at the end of the period. | Overage cost is the retail price minus the salvage value Underage cost is the retail price minus the wholesale price A low underage cost and a high overage cost indicate high risk of having excess inventory.

Answer 1

Answer:

True statements:

· Overage cost is the retail price minus the salvage value.

· Underage cost is the retail price minus the wholesale price.

· A low underage cost and a high overage cost indicate high risk of having excess inventory.

Because:      

· The cost of overage is the money you spent to make each product and the cost of underage is the profit you lose when you miss a sale because you ran out of product.

· Note that the cost of underage will always be the price minus the cost of overage.