ECONOMICS

Detailed explanation-1: -Storage costs are the amount of money incurred as a result of storing inventory. The costs could be direct or indirect money spent on the storage of goods. The storage costs may include costs for space, rent, electricity, software, depreciation and warehouse personnel.

Detailed explanation-2: -Storage costs are excluded from the cost of inventories ‘unless those costs are necessary in the production process before a further production stage’. Therefore, storing finished goods in a warehouse does not increase their cost.

Detailed explanation-3: -Categorizing inventory costs Ordering costs (also called Setup costs) Carrying costs (also called Holding costs)

Detailed explanation-4: -Stockout Costs The consequence of a stockout is a missed sales opportunity. Stockout cost refers to the total expense of an inventory shortage including lost revenue. A stockout can be especially harmful to your business if the shopper is a first-time customer.