ISM3011wk2 - Inventory = $ Unit Cost(makes up cost of...

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Inventory = $ Unit Cost (makes up cost of inventory: SAP uses PRiCE) anything that has value Price = Value Ordering Cost: cost of placing an order. (sometimes costs involve taking an inventory, includes labor costs) Holding Costs: Costs of holding a unit on inventory: storage, space (renting a warehouse) insurance (insuring product), Obsolesce (high obsolesce, lose value quickly, longer I hold it, less value it has)…. Typically looking at it per item. Warehouse stores bottles of water. 40,000, how to determine cost of holding one. Figure it out as a percentage. If we order 10,000 bottles of water and hold them for a year, in that year what were the total costs of holding them? Then we can say it was 10 percent of the price, what we paid for it. IF you know what you paid for it, and you can figure out the costs as a percentage, you can find the price by taking the holding costs and multiplying it by a percentage. Paid 50 cents for water and holding cost is 10 percent; holding cost is 5 cents, to hold one bottle for a year. Need to know price, unit costs, ordering costs. If you hold a lot of items, holding costs
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This note was uploaded on 08/29/2011 for the course ISM 3011 taught by Professor Szymanski during the Winter '08 term at University of Central Florida.

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ISM3011wk2 - Inventory = $ Unit Cost(makes up cost of...

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