Question

Cost of not carrying sufficient inventory is known as:

• A. Carrying Cost
• B. Holding Cost
• C. Total Cost
• D. Stock-out Cost

Answer 1

The correct option is D Stock-out Cost

Option D is correct.

It is also a loss of opportunity to sale.

Stock out cost is defined as economic value of not fulfilling the the demand of the product from the current inventory.

Stock out cost may includes internal cost like cost of delay, idle time cost of labor, loss of production cost etc and external cost i.e. loss of profit due to lost sale and loss of future profits.