Question: Why is it appropriate to include only the incremental cost
Why is it appropriate to include only the incremental cost when estimating the holding and order cost for a firm?
Answer to relevant QuestionsWhat is the role of safety inventory in the supply chain? What are the pros and cons of the various measures of product availability? Consider two products with the same cost but different margins. Which product should have a higher level of product availability? Why? Why is it important to account for congestion when pricing the use of transportation infrastructure? Explain why, for the same inventory level, a revenue-sharing contract results in lower sales effort from the retailer than if the retailer has paid for the product and is responsible for all remaining inventory.
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