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Managing Inventories to Increase Net Income Requires Companies to Effectively

Question 39

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Managing inventories to increase net income requires companies to effectively manage costs associated with goods for sale.
Required: Classify the below listed items as:

Premises:

Responses:

costs of obtaining purchase approvals

Purchasing Costs

costs resulting from embezzlement by employees

Ordering Costs

internal failure costs

Carrying Costs

opportunity cost of the investment tied up in inventory

Stockout Costs

costs associated with storage

Costs of Quality

costs of lost sales as a result of not having an item requested by a customer

Shrinkage Costs

freight-in charges

special processing costs

costs of wages for work-in-process inspections

costs that result from misclassifications and clerical errors

Premises:

costs of obtaining purchase approvals

costs resulting from embezzlement by employees

internal failure costs

opportunity cost of the investment tied up in inventory

costs associated with storage

costs of lost sales as a result of not having an item requested by a customer

freight-in charges

special processing costs

costs of wages for work-in-process inspections

costs that result from misclassifications and clerical errors

Responses:

Purchasing Costs

Ordering Costs

Carrying Costs

Stockout Costs

Costs of Quality

Shrinkage Costs

Correct Answer:

Premises:

Responses:

costs of obtaining purchase approvals

costs resulting from embezzlement by employees

internal failure costs

opportunity cost of the investment tied up in inventory

costs associated with storage

costs of lost sales as a result of not having an item requested by a customer

freight-in charges

special processing costs

costs of wages for work-in-process inspections

costs that result from misclassifications and clerical errors