Purchase cost and ordering cost, Cost Accounting

Ordering cost is incurred whenever the inventory is replenished. It includes costs associated with the processing and chasing of the purchase order transportation, inspection for quality expediting overdue orders and so on it is also known as the procurement cost.

The parallel of the ordering cost when units are produced within the organization is the set up cost. It refers to the cost incurred relation to developing the production schedules the resources employed in making the production systems ready and so on.

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