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Managing Inventories to Increase Net Income Requires Companies to Effectively

Question 151

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Managing inventories to increase net income requires companies to effectively manage costs associated with goods for sale.
Required: Classify the below listed items as:

Premises:
costs of obtaining purchase approvals
costs resulting from embezzlement by employees
internal failure costs
opportunity cost of the investment tied up in inventory
costs associated with storage
costs of lost sales as a result of not having an item requested by a customer
freight-in charges
special processing costs
costs of wages for work-in-process inspections
costs that result from misclassifications and clerical errors
Responses:
Purchasing Costs
Ordering Costs
Carrying Costs
Stockout Costs
Costs of Quality
Shrinkage Costs

Correct Answer:

costs of obtaining purchase approvals
costs resulting from embezzlement by employees
internal failure costs
opportunity cost of the investment tied up in inventory
costs associated with storage
costs of lost sales as a result of not having an item requested by a customer
freight-in charges
special processing costs
costs of wages for work-in-process inspections
costs that result from misclassifications and clerical errors
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