Which of the following reflects the two major costs associated with inventory assuming demand is known with certainty?
A) ordering costs and setup costs
B) setup costs and stockout costs
C) ordering costs and carrying costs
D) stockout costs and carrying costs

Question

Quizplus · Accepted Answer

The two major costs associated with inventory assuming demand is known with certainty are ordering costs and carrying costs. Ordering costs include expenses incurred in placing and receiving orders such as shipping, handling, and administrative costs. Carrying costs include expenses associated with holding inventory such as storage, handling, insurance, and obsolescence costs. Setup costs and stockout costs are associated with uncertain demand, and stockout costs and carrying costs are not the two major costs associated with inventory assuming demand is known with certainty.

Which of the Following Reflects the Two Major Costs Associated