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What is the difference between purchase cost and ordering cost in EOQ?
Is it true that all the costs associated with the material purchase such as transportation costs, documentation charges, installation & inspection charges etc are called Ordering costs?
The purchases cost is the amount paid per unit.
The order cost is the fixed amount payable each time an order is placed (which would include the costs you have listed). However be careful about transportation costs because if there is a charge per unit delivered it would be included in the purchase cost, whereas if it was a fixed cost per order then it is an order cost.
Have you watched my free lectures on this?
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