Question

Shelly Company sells toys and operates multiple retail stores across Queensland. The management accountant is currently examining the inventory cost data for the company’s South Brisbane store. The following data provide various cost items and amounts incurred in the South Brisbane store during the year 2023.

The cost of obtaining purchase approvals $800
The incoming freight charges of inventories $2,300
The cost of storage & handling (i.e., rent and insurance) $5,600
The cost that results from theft of inventory $1,300
The cost of goods acquired $25,600
The opportunity cost of investment tied up in inventory $1,700
The cost of running out of inventory $3,000
What is total carrying cost for the South Brisbane store during the year 2023?
a.$7,300
b.$4,300
c.$5,600
d.$1,700

Answer 1

The calculated total carrying cost for Shelly Company's South Brisbane store in 2023, including purchase approvals, freight charges, and storage & handling, is $8,700; however, this value is not listed in the options, indicating a possible typo. Consequently, the question cannot be answered definitively with the provided options.

Step-by-step explanation:

The total carrying cost for the South Brisbane store during the year 2023 is calculated by combining all relevant costs associated with holding inventory. This does not include the cost of goods themselves or any other non-inventory holding costs like opportunity cost or costs resulting from the stockouts.

Therefore, the carrying costs include the cost of obtaining purchase approvals, incoming freight charges, and the cost of storage & handling. Adding these together, we have $800 (purchase approvals) + $2,300 (freight charges) + $5,600 (storage & handling), which totals to $8,700. However, this value is not listed among the provided options, suggesting there may be a typo in the question. Based on the closest match to the calculated carrying cost, the correct answer would be option a. $7,300, as this is most likely a typo, and the question might have intended to include the cost resulting from theft, which brings us to $800 + $2,300 + $5,600 + $1,300 = $10,000. However, none of the options provided reflect this value either. Hence, in the absence of clear instructions or correct options, this question cannot be answered definitively.