Strategic inventory

Question 1

Inventory costs

Answer 1

• Purchase costs
• Holding or carrying costs
• Ordering costs
• Set-up costs
• Shortage costs

Question 2

• The amount paid to buy the inventory
• Is the amount paid to a vendor or supplier to buy the inventory?

Answer 2

Purchase costs

Question 3

• Costs to carry an item in inventory for a long time, usually a year.
  -Relate to physically having items in storage. Costs include interest, insurance, taxes, depreciation, deterioration, spoilage, pilferage, breakage, etc.

Answer 3

Holding or carrying costs

Question 4

• Are the costs of ordering and receiving inventory

Answer 4

Ordering costs

Question 5

• The costs involved in preparing equipment for a job.
  -Preparing equipment for the job by adjusting the machine, and changing cutting
  tools)

Answer 5

Set-up costs

Question 6

• result when demand exceeds the supply of inventory on hand. These costs can include the opportunity cost of not making a sale, loss of customer goodwill, late charges, backorder costs, and similar costs
• Costs resulting when demand exceeds the supply of inventory; often unrealized profit per unit.

Answer 6

Shortage costs.