MANAGEMENT

Detailed explanation-1: -Obsolescence costs are incurred when an item in inventory becomes obsolete before it is sold or used. Inventory may become obsolete due to product design changes, changes in customer demand, or by remaining unsold after an acceptable shelf life.

Detailed explanation-2: -Obsolete inventory refers to a product that has reached the end of its lifecycle. It happens when a business considers it to be no longer sellable or usable and most likely will not sell in the future due to a lack of market value and demand.

Detailed explanation-3: -Inventory obsolescence is often caused by businesses failing to understand the product life cycles of the items they stock and consequently missing the warning signs of those nearing their end.

Detailed explanation-4: -Understanding Obsolescence This results in a loss of value to the business holding the item. For example, if your company purchased 100 widgets, sold 25 of them but could not sell the remaining 75 widgets, the remaining widgets would be considered obsolete inventory.