Which inventory cost can include lost sales,cost of expediting,and cost of interrupted production?
A)the ordering cost
B)the carrying cost
C)the stockout cost
D)the setup cost

Question

Quizplus · Accepted Answer

The costs of lost sales, expediting, and interrupted production are all associated with stockouts – when a company runs out of inventory and is unable to fulfill customer orders or maintain production. These costs are collectively known as stockout costs, and are a major component of the total cost of inventory. Therefore, the correct answer is C – the stockout cost. Ordering costs (A) refer to the expenses associated with placing an order for inventory, while carrying costs (B) are the expenses incurred to store and maintain inventory. Setup costs (D) are expenses related to the preparation of equipment or machinery for a production run.

Which Inventory Cost Can Include Lost Sales,cost of Expediting,and Cost