Includes inventory a physical cost of space 3 b taxes

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Unformatted text preview: cludes: inventory a) Physical Cost of Space (3%) b) Taxes and Insurance (2 %) c) Breakage Spoilage and Deterioration (1%) d) Opportunity Cost of alternative investment (18%) d) (Total: 24%) (Total: Since inventory may be changing on a continuous basis, holding cost is proportional to the area under the inventory curve. inventory 3 Inventory as a Inventory Function of Time Function Relevant Costs Ordering Cost (or Production Cost) Ordering Includes both fixed and variable components. C(x) = K + cx for x > 0 and =0 for x = 0. cx 4 Relevant Costs Penalty or Shortage Costs. All costs that accrue when insufficient stock is available to meet demand. These include: include: Loss of revenue for lost demand Loss Costs of bookkeeping for backordered demands Costs Loss of goodwill for being unable to satisfy demands when they occur. Gener...
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