Future Business Leaders of America (FBLA) Entrepreneurship Practice Test

What will cost you more if you order large quantities that you will eventually use?

1. Ordering Costs

2. Holding/Carrying Costs

3. Shipping Costs

4. Purchase Costs

The correct answer is: Holding/Carrying Costs

When ordering large quantities of products, holding or carrying costs increase because these costs are associated with storing the goods until they are sold or used. Holding costs typically include expenses such as warehousing, insurance, depreciation, and potential inventory obsolescence. As the quantity of inventory increases, so does the amount of space required for storage, along with the increasing costs for maintaining that inventory, which can add up significantly over time. Ordering costs involve the expenses related to the process of placing and receiving orders, which typically do not increase proportionately with larger bulk orders. Shipping costs are usually fixed per shipment and may not rise significantly with larger quantities. Purchase costs are related to the price of the items themselves and do not necessarily increase with the quantity ordered. Therefore, it is the holding or carrying costs that will incur higher expenses when large quantities are ordered, making this the correct choice.