ECONOMICS

Detailed explanation-1: -Ordering costs are the expenses incurred to create and process an order to a supplier. These costs are included in the determination of the economic order quantity for an inventory item.

Detailed explanation-2: -Ordering costs, also known as setup costs, are essentially costs incurred every time you place an order from your supplier.

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: -Examples of order costs include the costs of preparing a requisition, a purchase order, and a receiving ticket, stocking the items when they arrive, processing the supplier’s invoice, and remitting the payment to the supplier.