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Table of Inventory

Table of Inventory

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Published by: sudhirkambli on Sep 29, 2011
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04/19/2012

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Basic Inventory Decisions

How much?
Lot sizing decision Determination of the quantity to be ordered.

When?
Lot timing decision Determination of the timing for the orders.

RELEVANT INVENTORY COSTS
Relevant Inventory Costs

Item Costs
Direct cost for getting an item. Purchase cost for outside orders, manufacturing cost for internal orders.

Holding Costs
Costs associated with carrying items in inventory. Storage and other related costs.

Ordering Costs
Fixed costs associated with placing an order (either a purchase cost for outside orders, or a setup cost for internal orders).

Shortage Costs
Costs associated with not having enough inventory to meet demand.

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