For each of the following costs, indicate whether the cost would be an out- of-pocket carrying cost (C) or a cost of placing an order (P). If the item does not qualify for either of these categories, note it as none of the above (N). Assume that wages vary with the level of work while salaries are fixed for a monthly or longer time period.

a. Hourly fee for inventory audit.

b. Salary of purchasing supervisor.

c. Costs to audit purchase orders and invoices on a per-order basis.

d. Taxes on inventory.

e. Stockout costs.

f. Storage costs charged per unit in inventory. g. Fire insurance on inventory. h. Fire insurance on warehouse. i. Obsolescence costs on inventory. j. Shipping costs per shipment.14-1. Since the operations research specialists develop and maintain inventory models, why does the accountant become concerned with inventory policy decisions? 14-2. Why is the cost of capital included as a carrying cost of inventory? 14-3. In determining economic order quantities, the carrying cost per unit is divided by two. Why? 14-4. A staff accountant for Percolators, Inc., noted that the annual carrying cost for a specific inventory item is estimated at $28,500, while the annual order cost is estimated at $14,150. Does this information tell you anything about the relationship of the actual order quantity to the optimal order quantity? Explain. 14-5. In terms of the specifics of the costs associated with inventory policy, how does the concept of differential costs apply to the problem of inventory policy?

14-6. For each of the following costs, indicate whether the cost would be an out- of-pocket carrying cost (C) or a cost of placing an order (P). If the item does not qualify for either of these categories, note it as none of the above (N). Assume that wages vary with the level of work while salaries are fixed for a monthly or longer time period.

a. Hourly fee for inventory audit.

b. Salary of purchasing supervisor.

c. Costs to audit purchase orders and invoices on a per-order basis.

d. Taxes on inventory.

e. Stockout costs.

f. Storage costs charged per unit in inventory.

g. Fire insurance on inventory.

h. Fire insurance on warehouse.

i. Obsolescence costs on inventory.

j. Shipping costs per shipment.