What is the consequence of product spoilage in inventory management?

Product spoilage in inventory management primarily results in increased insurance costs. When goods spoil, businesses often face losses that may lead them to increase their insurance coverage to protect against future spoilage. This increase can be in the form of higher premiums, as carriers may assess a higher risk level for businesses that frequently encounter spoilage issues. Additionally, handling spoiled products can lead to added costs, impacting the overall financial health of the business.

In contrast, the other options suggest outcomes that are not typically associated with product spoilage. For instance, higher sales revenue would not result from spoilage; instead, spoilage typically represents a loss of potential sales revenue. Reduced tax liability is equally unlikely; businesses usually cannot deduct the cost of spoiled goods, which means that spoilage does not favorably affect tax circumstances. Lastly, decreased market value can occur as a consequence of spoilage in terms of reputation and financial performance, but it is the increased costs associated with managing spoilage that are the most direct and immediate consequences.