Managing Inventories to Increase Net Income Requires Companies to Effectively

question 86

Essay

Managing inventories to increase net income requires companies to effectively manage costs associated with goods for sale.
Required:
Classify the below listed items as either Purchasing Costs, Ordering Costs, Carrying Costs, Stockout Costs, Costs of Quality, or Shrinkage Costs.
________a.costs of obtaining purchase approvals
________b.costs resulting from embezzlement by employees
________c.internal failure costs
________d.opportunity cost of the investment tied up in inventory
________e.costs associated with storage
________f.costs of lost sales as a result of not having an item requested by a customer
________g.freight-in charges
________h.special processing costs
________i.costs of wages for work-in-process inspections
________j.costs that result from misclassifications and clerical errors

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Definitions:

Debt-to-Equity Ratio

A financial metric that shows the balance between the equity provided by shareholders and the debt leveraged to support a company's assets.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity available for its day-to-day operations.

Long-term Liabilities

Financial obligations of a business that are due more than one year in the future, such as bonds payable or long-term loans.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.