Number of purchase orders for each year is multiplied to relevant ordering cost for each purchase order to calculate

April 15, 2024 by rawan239

cost of placing an order, such as the cost of the purchasing department’s time and the cost of any shipping or handling fees. The number of purchase orders for each year multiplied by the relevant ordering cost for each purchase order is the annual relevant ordering costs.

The annual irrelevant ordering costs are the costs that are not affected by the number of purchase orders, such as the cost of the warehouse space used to store inventory. The annual irrelevant carrying costs are the costs that are not affected by the level of inventory, such as the cost of insurance on inventory.