ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
Question
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Which of the following costs is a relevant inventory stockout cost under EOQ decision model?
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The costs of obsolescence and costs of insurance that change with the quantity of inventory held.
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The return forgone by investing capital in inventory rather than elsewhere.
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The lost profit on sales forgone as a result of customer dissatisfaction due to unavailability of goods.
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The costs of storage space owned that cannot be used for other profitable purposes when inventories decrease.
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Explanation:
Detailed explanation-1: -The economic order quantity increases with higher demand and higher carrying costs and decreases with higher ordering costs.
Detailed explanation-2: -Holding costs (H) Holding cost (also known as carrying costs) refers to the total cost of holding inventory. Annual demand (D) Order cost (S) 26-Feb-2020
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