ECONOMICS

Detailed explanation-1: -Too little inventory can add as much as 25 percent to the cost of inventory. The goal of inventory control procedures is to maximize profits with minimum inventory investment, without impacting customer satisfaction levels.

Detailed explanation-2: -The effects of too little inventory This happens when you cannot immediately fulfill an order because of a stock-out of the ordered item. Not keeping track of inventory levels can lead to stock out of popular items during a sudden surge in demand. This can happen due to peak season or other external factors.

Detailed explanation-3: -An inventory cost refers to all the costs associated with holding and the management of inventory. The costs include all expenses related to ordering, warehousing, protecting, and deteriorating costs.

Detailed explanation-4: -The cost of inventory includes the cost of purchased merchandise, less discounts that are taken, plus any duties and transportation costs paid by the purchaser.

Detailed explanation-5: -This cost ensures that you do not run into grave losses by holding inventory over a long period of time. Always the carrying cost should only be in limits of 20% – 30% of your total inventory value.