Which inventory cost can include lost sales, cost of expediting, and cost of interrupted production?
A) the setup cost
B) the carrying cost
C) the ordering cost
D) the stockout cost

Question

Quizplus · Accepted Answer

The cost of stockouts includes not just the lost sales, but also the cost of expediting (if items need to be rushed to avoid stockouts) and the cost of interrupted production (if the missing item is needed for production). The setup cost refers to the cost of preparing machines or equipment for production, while the carrying cost refers to the cost of storing inventory over time. The ordering cost refers to the cost of placing an order (e.g. labor costs, paperwork) but not the cost of the stockouts.

Which Inventory Cost Can Include Lost Sales, Cost of Expediting