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Ordering Costs
These are incurred in getting purchased items into the company’s inventory or stores, and usually consist of clerical costs of:• Making the purchase demand.• Issuing of a purchase order• Follow-up action• Receiving the goods• Inspection for quality control• Placing goods in stores• Paying vendors (Suppliers)Note:The basic EOQ model assumes that these costs are fixed constant for each order made.
Barker Company has a single product called a Zet. The company normally produces and sells 80,000 Zets each year at a selling price of $40 per unit. The company’s unit costs at this
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