Question

Enumerate any 3 categories of costs involved in inventory
management system

Answer 1

The three categories of costs involved in inventory management systems are holding costs, ordering costs, and shortage costs.

Step-by-step explanation:

The three categories of costs involved in inventory management systems are: holding costs, ordering costs, and shortage costs.

1. Holding costs refer to the expenses incurred in storing and managing inventory. Examples include rent, insurance, and obsolescence.
2. Ordering costs are the costs associated with placing and receiving orders for inventory. These costs include paperwork, transportation, and personnel.
3. Shortage costs are the costs incurred when there is insufficient inventory to meet demand. This includes lost sales, backorders, and customer dissatisfaction.

By effectively managing these three types of costs, businesses can optimize their inventory levels and improve profitability.