Order Cost is defined as; a direct labor cost that is incurred when an order is placed. Ordering costs are different from the “Order Costs”.
The ordering costs are all the costs associated with the purchase order and any labor involved in inspecting the goods when received, any labor associated with stocking the received items, invoicing suppliers and issuing payments. Ordering costs can typically vary tremendously between orders.
Examples of Ordering Costs
You now know what ordering costs are. In short, ordering costs are the costs that increase as the number of orders placed increases. In other words ordering costs are directly related to the number of orders placed and not the volume of order. This includes costs that may be related to different types of clerical work, like, preparing, releasing, monitoring and receiving orders; It can also include the physical handling of goods; inspections and setup costs.
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