APICS Certified in Logistics, Transportation and Distribution (CLTD) — Question 63

When looking at on organization's logistics system, which of the following expenses is the single largest variable cost?

Answer options

• A. Inventory carrying costs
• B. transportation costs
• C. Warehouse operations costs
• D. Supply management costs

Correct answer: A

Explanation

Inventory carrying costs are considered the largest variable cost because they fluctuate based on the volume of inventory held and the associated costs of storage, insurance, and depreciation. Transportation costs can be substantial, but they typically do not surpass the cumulative costs associated with inventory management. Warehouse operations and supply management costs are also significant but generally account for a smaller portion of the overall variable costs compared to inventory carrying costs.