CIPS L4M7 Exam - Topic 10 Question 16 Discussion

Actual exam question for CIPS's L4M7 exam

Question #: 16
Topic #: 10

Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory belongs to which of the following?

AAcquisition costs

BPurchase price

CHolding costs

DCosts of stockouts

Show Suggested Answer

Suggested Answer: C

For single items, an extra investment in inventory (higher levels of safety stock) will always in-crease customer service levels. Conversely, higher service levels imply larger quantities of safety stocks and an increased investment in inventory. (Procurement and Supply Chain Management - 9th Edition)

LO 2, AC 2.2

by Arlette at Apr 24, 2023, 07:14 PM

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Reta

10 months ago

Purchase price doesn't cover opportunity costs, just saying!

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Leeann

10 months ago

Wait, is opportunity cost really tied to inventory like that?

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Kimbery

10 months ago

I thought opportunity cost was just about lost sales?

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Hubert

11 months ago

I disagree, it's more about acquisition costs.

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Glenn

11 months ago

It's definitely related to holding costs.

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Pamella

11 months ago

I feel like this is similar to a question we did on stockouts, but I can't recall how opportunity costs fit in.

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Elly

11 months ago

I’m a bit confused; I thought purchase price was more about the actual cost of buying the inventory, not the opportunity cost.

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Irene

11 months ago

I remember a practice question that mentioned opportunity costs, and I think it was linked to acquisition costs.

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Laurene

11 months ago

I think the opportunity cost is related to holding costs, but I'm not entirely sure.

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Marge

11 months ago

Okay, let me think this through. The SDLC has planning, analysis, design, implementation, and maintenance phases. Media sanitation sounds like it would be part of the implementation phase, so I'm going to go with C.

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Beatriz

11 months ago

I feel pretty confident about this one. The question is asking the developer to fulfill the merchant's requirement to sell a combination of four existing products under a unique product ID. Based on that, I think the best option is A - Create a unique product called 'Our Top Combo' and add the four products into the Product Bundles tab.

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Kasandra

11 months ago

Okay, let's see. I know Cisco has some industrial Ethernet switch products, so that's probably the right direction to look in. I'll have to review my notes on their roadside infrastructure solutions.

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Pilar

1 year ago

Wait, so the opportunity cost is the cost of not being able to use that money for something else? In that case, it's definitely holding costs. Holding onto that inventory is costing me potential investments!

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Pansy

1 year ago

Opportunity cost? Isn't that like when you have to give up something to get something else? In that case, it's gotta be the holding costs. Can't use that money for anything else while it's sitting in inventory.

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Nathan

1 year ago

Holding costs are definitely the opportunity cost in this case.

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Kenneth

1 year ago

I agree, holding costs prevent you from using that money for other investments.

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Mattie

1 year ago

Yeah, holding costs tie up the investment in inventory, so it's definitely the opportunity cost.

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Jesusa

1 year ago

I think you're right, holding costs make sense for opportunity cost.

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Socorro

1 year ago

I'm pretty sure it's C) Holding costs. The opportunity cost is the cost of not being able to use that capital for other purposes.

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Hyman

1 year ago

I agree, holding costs would be the category that the opportunity cost of the investment tied up in inventory falls under.

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Leonard

1 year ago

Yeah, holding costs include the cost of capital tied up in inventory, so it definitely fits.

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Carey

1 year ago

I think you're right, it makes sense that the opportunity cost would fall under holding costs.

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Angelica

1 year ago

Holding costs makes the most sense to me. After all, the opportunity cost is the cost of not being able to use that money for something else while it's tied up in inventory.

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