CPIM Practice Exam

Which costs are considered when calculating ordering costs?

1. Costs per item produced

2. Costs that accumulate with increased orders

3. Costs of canceled orders

4. Costs of shipping and handling

The correct answer is: Costs that accumulate with increased orders

The correct answer focuses on the costs that accumulate with increased orders. Ordering costs are primarily related to the expenses incurred every time an order is placed, regardless of the number of items involved. These costs can include administrative expenses, order processing fees, and other overheads that increase with the frequency and volume of orders made. When analyzing ordering costs, it is important to recognize that they typically encompass various costs associated with managing inventory replenishment rather than the costs tied to the actual production of items or charges related to canceled orders. Shipping and handling costs, while relevant to logistics, fall under a different category focused on the movement of goods rather than the process of ordering itself. Understanding this distinction helps clarify why the accumulated costs tied to placing more orders are central to the calculation of ordering costs.