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The penalty cost is the cost per unit of not satisfying the order when it is received. Shortage cost or stock-out cost is the total of all costs associated with shortage units. We use penalty cost in inventory planning. The penalty cost should not be something you pay actually. It can be like a chance of profit you missed, which is called the opportunity cost. However, there is a case when you should pay a penalty for the shortage. This happens when you have an agreement with a customer to satisfy the demand by a certain date with the right quantities, or you will pay a penalty for the breach of contract.
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What are the differences between raw material inventory and finish product inventory?
These are some differences in the general cases.FINISHED PRODUCT INVENTORYRAW MATERIAL INVENTORYUsually there is no lead timeUsually there is a lead timeQuantities reach the inventory individually or by groupsQuantities reach the inventory all togetherThe holding cost is greater than the holding cost for the raw material inventoryThe holding cost is less than the holding cost for the finish product inventoryproduction starts if the inventory is emptyproduction stops if the inventory is emptyUsually is smaller in size than the raw material inventoryUsually is bigger in size than the finish product inventoryQuantity size depends on the demandQuantity size depends on the productionproduction stops if the inventory is fullproduction starts if the inventory is fullExcess quantity in the inventory means marketing methods need to be improvedExcess quantity in the inventory means manufacturing methods need to be improvedproduction quality can be measured in these inventoryproduction quality can not be measured in these inventory
What ia penalty cost?
It is a cost that is calculated based on how much the goods should returned profit for you If they were sold or rented to other company . This cost is important in the inventory holding cost Since by this cost you will judge either you produce the products and keep them or waiting until the order comes to you and produce only the desired amounts without keeping any amount in the inventory .
What is the order cost in inventory management?
The order cost includes all costs related to the inventory item. There are two components of the order cost. The first component is the fixed order cost which is the amount of money paid when you place an order regardless of the number of units ordered. This can be like fees for placing order or the shipment cost when it doesn't make any difference whether you order 1 unit or 100 units. The other component is the variable order cost which is a cost per unit of order.
The inventory valuation method that tends to smooth out erratic changes in costs is?
Weighted average method which requires to use the weighted average cost per unit of inventory at the time of each sale.
How do you calculate beginning work in process inventory?
beginning work in process + requisted for manufacturing ( direct material + direct labor + man. overhead ) = cost of goods completed + ending work in process
What are the various costs involved in an inventory problem?
Ordering cost carrying cost shortage cost
How do you reduce Inventory Shortage Shrinkage?
You should offset it to Cost of Goods sold. It should be done thru Write-off of Goods.
Inventory shortage is recorded when?
merchandise is returned to seller
What is the difference between inventory control and inventory planning?
Their is no Difference
Inventory carrying cost and cost of not having it?
Inventory carrying cost is that cost which is incurred by company to stock the inventory while cost for not having inventory means that cost which company has to bear due to non availability of inventory like loss of sales or good sales opportunity loss cost etc.
Retail inventory or cost inventory?
retail inventory retail inventory retail inventory
The characteristics of inventory planning and control?
Inventory planning keeps an accurate count of what materials a company needs to sell or use to produce products. The inventory is controlled by predicting usage based on past usage.
What inventory cost methods is appropinate for a business who has inventorynunique what a relative small number of?
The inventory cost of a business inventory is poo
How much would it cost to convert from a manual to an automatic transmission?
it depends on what kind of car, how much of parts inventory you personally have, and how much work you are planning on doing.............
What has the author Dennis W McLeavey written?
Dennis W. McLeavey has written: 'Production planning and inventory control' -- subject(s): Inventory control, Production planning
How is math used in US food service?
recipe formulation and calculation service determintion dealing with head counts, food portioning, food cost,menu planning and cost projections there of, inventory establishment,
What is the explanation for the various costs involved in inventory?
carrying cost, ordering cost or setup cost are major cost involved in inventory
