CPIM Practice Exam

Which of the following is considered an ordering cost?

1. Production control costs

2. Capital costs

3. Risk costs

4. Obsolescence costs

The correct answer is: Production control costs

Ordering costs refer to expenses incurred in the process of placing and receiving orders for inventory. This can include costs related to order processing, transportation, and the administrative expenses linked to managing orders. The first choice, production control costs, often involves the management of inventory and production schedules. These costs can be associated with ensuring that the right quantities of materials are purchased and available for production processes, which aligns closely with the broader definition of ordering costs. Managing how products are ordered and ensuring they meet production schedules inherently involves decision-making processes and associated expenses, making this option relevant in the context of ordering. In contrast, the other options relate to costs that are not directly associated with the act of placing or managing orders. Capital costs pertain to the investment in assets necessary for production, risk costs deal with uncertainties involved in the supply chain, and obsolescence costs indicate losses from items becoming outdated or unsellable, none of which specifically capture the components of ordering costs.