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Management accounting 2022

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Question:

How does costs of stock relate to opportunity costs?

Author: Hjalmer Pedersen



Answer:

When buying and storing direct materials, there might be opportunity costs associated with doing so. We have a limited resource that is cash, and we must decide what is the best use for it. Is it in buying direct materials? Investment in materials stock? Government bonds? We must use the money for what generates most profit!


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