Answer (D) is correct . Inventory costs fall into three categories: order or set-up costs, carrying (holding) costs, and stockout costs. Carrying costs include storage costs for inventory items plus opportunity cost (i.e., the cost incurred by investing in inventory rather than making an income-earning investment). Examples are insurance, spoilage, interest on invested capital, obsolescence, and warehousing costs.
Answer (A) is incorrect because Disruption of production schedules may result from a stockout.
Answer (B) is incorrect because Quantity discounts lost are related to ordering costs or inventory acquisition costs.
Answer (C) is incorrect because Shipping and handling costs are included in acquisition costs.
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