In Inventory control, explain what are stock-out costs and give examples of stock-out costs

January 13th, 2012 Comments off
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Stock-out costs are costs associated with running out of stock

Examples of stock-out costs are:

  • Lost contribution through the lost sale caused by the stockout
  • Loss of future sales as customers go elsewhere
  • Loss of customer goodwill
  • Cost of production stoppages caused by stock-out of  work-in-progress or raw materials
  • Labour frustration over stoppages
  • Extra costs associated with urgent, often small quantity, replenishment purchases.

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Financial Accounting


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