Page 42 - F2 Slides 2017-18
P. 42
Holding and Ordering Costs
Stock-out costs : Holding costs: Ordering costs :
running out of inventory holding inventory placing orders
Fixed costs
Loss of sales • Cost of storage Administrative
space, insurance costs
Variable costs
Loss of customers • Interest on capital Delivery
and goodwill tied up in
inventory
Order costs vary
Reduced profits with number of
orders placed
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