Hey students...in last article, we talked about EOQ, now we will discuss the concept of Ordering Costs & Carrying Costs.
#Ordering costs:
Ordering costs are the costs which are related to ordering or processing or procuring or receiving of materials.
Ordering Costs include :
1. Purchase department expenses e.g., PURCHASE DEPARTMENT employee salaries, electricity expenses, telephone bills, internet charges, rent, etc.
2. Procurement cost
3. Cost of printing, stationery, postage of PURCHASE DEPARTMENT.
4. Cost of collecting material
5. Cost of receiving material
6. Cost of bill payment e.g. preparation & sending of draft, fund transfer to supplier.
7. Cost of transit insurance.
8. Cost of inspection.
9. Cost of loading & unloading of materials from supplier's place to store room of factory.
10. Transportation cost of material from supplier's place to factory store room....,etc.
#Carrying Costs:
It involves the cost of holding, carrying & storing the inventory. It will not be incurred if inventories are not carried.
These costs include:
1. Store room rent
2. Store keeper" salary
3. Store room electricity expenses, handling cost of inventory
4. Insurance premium of inventory kept in the store room
5. Opportunity cost e.g. interest lost due to blocking of working capital, interest cost of inventory kept in the store room.
6. Breakage, spoiling, obsolescence normally happening during storage activities.
FRIENDS JUST CONCETRATE ON CONCEPTS...SELF STUDY IS MUCH BETTER THEN THOSE "TRAINERS" WHO DONT HAVE PROPER KNOWLDGE ABOUT YOUR SUBJECTS.