Name and describe the categories of ordering costs found in a factory
Critical Path Method
The critical path is the longest succession of tasks that has to be successfully completed to conclude a project entirely. The tasks involved in the sequence are called critical activities, as any task getting delayed will result in the whole project getting delayed. To determine the time duration of a project, the critical path has to be identified. The critical path method or CPM is used by project managers to evaluate the least amount of time required to finish each task with the least amount of delay.
Cost Analysis
The entire idea of cost of production or definition of production cost is applied corresponding or we can say that it is related to investment or money cost. Money cost or investment refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factor of production or factor services.
Inventory Management
Inventory management is the process or system of handling all the goods that an organization owns. In simpler terms, inventory management deals with how a company orders, stores, and uses its goods.
Project Management
Project Management is all about management and optimum utilization of the resources in the best possible manner to develop the software as per the requirement of the client. Here the Project refers to the development of software to meet the end objective of the client by providing the required product or service within a specified Period of time and ensuring high quality. This can be done by managing all the available resources. In short, it can be defined as an application of knowledge, skills, tools, and techniques to meet the objective of the Project. It is the duty of a Project Manager to achieve the objective of the Project as per the specifications given by the client.
Name and describe the categories of ordering costs found in a factory
Manufacturers produce products to be sold in the market. These products are sold with different intermediaries such as wholesalers, agents, retailers, etc. These products are sent to various destinations across the country and globally according to the orders received from wholesalers.
The cost incurred on the orders received by the organization is termed as ordering cost. These costs or expenses are made on suppliers, expenses on documentation, expenses made on inspection of goods before dispatch, etc.
Various ordering costs found to be incurred in an organization are:
- Expenses an organization has to make on a purchase order.
- Whenever goods are received from anywhere, either as raw material or semi-finished or finished goods, they are inspected for their quality. This expense is also counted as ordering cost.
- Goods after inspection are sent to stock. Labor cost spent for placing the goods as stock is also ordering cost.
- Expenses are made when the invoice is issued to the supplier. The cost incurred on labor for preparing the supplier's invoice is also the ordering cost.
- Payments made or received are not made automatically. Someone is operating the system for the same. Hence, the cost incurred on labor for supplier's payment is also ordering cost.
The costs mentioned above are ordering costs. Also, these costs are made irrespective of the size of the orders. The larger the order, the less is the cost. The smaller is the order, the higher the cost incurred.
Also, these costs are incurred every time an order is placed or received.
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