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Controllable Inventory Costs

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Analyze the four costs associated with maintaining an inventory to determine which appears to be most controllable by any organization. Explain your rationale.

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Solution Summary

This solution discusses the four types of inventory costs, namely: ordering costs, set-up costs, holding costs and stock-out costs- and which of these is most controllable by the organization. A rationale for this argument is provided and supported by a scholarly resource.

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The four costs associated with maintaining an inventory are ordering costs, setup costs, holding costs, and stock-out costs. The first is the ordering cost or the cost of acquiring the raw materials. This can be a fixed per-unit cost or have a discount component. The second cost is that setup cost or the administration cost related to the order, receiving the shipment, and processing the ...

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