MANAGEMENT

Detailed explanation-1: -Setup costs include the labor to position tools and materials next to the machine, the labor to configure the machine, and the scrap cost of test units run on the machine.

Detailed explanation-2: -Ordering costs are the costs that a company spent to place an order for supplies. Making a purchase order and the labor cost associated with orders are some examples of ordering costs. Setup costs are incurred to make equipment or asset ready to process the goods from raw form of material to finished product.

Detailed explanation-3: -Setup costs refer to all of the costs associated with actually ordering the inventory, such as the costs of packaging, delivery, shipping, and handling. Demand rate is the amount of inventory a company sells each year. Holding costs refer to all the costs associated with holding additional inventory on hand.

Detailed explanation-4: -Definition of Setup Cost In manufacturing, setup cost is the cost incurred to get equipment ready to process a different batch of goods. Hence, setup cost is regarded as a batch-level cost in activity based costing. Setup cost is considered to be a non-value-added cost that should be minimized.