BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Ordering costs are the expenses your company incurs to purchase and receive the products it stocks in its inventory. These ordering costs can include shipping fees, unexpected transportation costs, inspection fees and other expenses necessary to acquire inventory products.

Detailed explanation-2: -Purchase Cost is a straight-forward “unit cost X number of units” calculation. In other words, volume discounts do not apply. As well, the unit cost remains constant over the year. Order Cost is a fixed overhead cost, and remains constant over the year.

Detailed explanation-3: -Ordering costs are considered expenses related to placing orders for new inventory. Transportation, shipping fees, inspection fees, and other expenses for conveying the order come under it. These costs are generally fixed in nature. These costs are a component in calculating the economic order quantity (EOQ).

Detailed explanation-4: -Both these factors move in opposite directions to each other. Ordering excess quantity will result in carrying cost of inventory. Where as ordering less will result in increase of replenishment cost and ordering costs. These two above costs together are called Total Stocking Cost.

Detailed explanation-5: -Ordering, holding, carrying, shortage and spoilage costs make up some of the main categories of inventory-related costs.