Topic 6 PowerPoint - 2

Topic 6 PowerPoint - 2 - Topic 6 Inventory Management (2)...

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Unformatted text preview: Topic 6 Inventory Management (2) Dr. Bin Jiang Department of Management 2 MGT 301 by Dr. Bin Jiang Economic Order Quantity Models 3 MGT 301 by Dr. Bin Jiang Costs Associated with Inventory Control Three categories of costs associated with inventory: 1 Purchasing costs 2 Ordering costs 3 Carrying costs 4 MGT 301 by Dr. Bin Jiang Purchasing Costs Purchasing costs are the costs of goods acquired from suppliers including incoming freight or transportation costs. These costs usually make up the largest single cost category of inventory. Discounts for different purchase-order sizes and supplier credit terms affect purchasing costs. 5 MGT 301 by Dr. Bin Jiang Ordering Costs Ordering costs are the costs of preparing, issuing, and paying purchase orders, plus receiving and inspecting the items included in the orders. Purchase approval and special processing costs are related to the number of purchase orders processed. 6 MGT 301 by Dr. Bin Jiang Carrying Costs Carrying costs arise when an organization holds an inventory of goods for sale. These costs include the opportunity cost of the investment tied up in inventory and the costs associated with storage such as space rental, insurance, obsolescence, and spoilage. 7...
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This note was uploaded on 05/19/2011 for the course MGMT 101 taught by Professor Steinberg during the Spring '11 term at Ill. Chicago.

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Topic 6 PowerPoint - 2 - Topic 6 Inventory Management (2)...

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