Final answer:
The false statement about inventory-related costs is that setup cost excludes the opportunity cost of a machine not working. Opportunity cost is indeed a part of the setup cost calculation.
Step-by-step explanation:
The student's question pertains to inventory-related costs. When analyzing the statements, the one that is false is: 'The cost of a setup excludes the opportunity cost of a machine not working.' This statement is incorrect because the cost of a setup does indeed include the opportunity cost of a machine not working. Opportunity costs are classified as implicit costs, which are costs that represent the potential benefits an individual, investor, or business misses out on when choosing one alternative over another. More simply, it is the cost of what else could be done with those resources including machine time.
It is important to consider both explicit costs and implicit costs when calculating economic profit, which is the total revenues minus total costs. This calculation helps a firm to determine their actual economic profit or loss. All factors of production, fixed costs, variable costs, and economies or diseconomies of scale influence this calculation. Understanding these concepts is crucial for businesses to make informed decisions about production and inventory management.