Question

Nathan calculated his company’s economic order quantity and categorized all production costs. One cost was related to the cost of storing milk in the freezers, and another cost was related to the insurance expenses that covered the company’s inventory. To which cost category would Nathan assign these costs?

Answer 1

The cost category which Nathan would put the insurance expenses is in the fixed cost per order.

What is Production Cost?

This refers to the sum total of all the costs which a company has when producing a good or service.

Hence, in this case, because Nathan is making calculations of the  company’s economic order quantity and he has to make a category of the production costs, he would have to put the insurance expenses is in the fixed cost per order.

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