Stock Out Cost is the cost of not having a product on the shelf when needed.

Stock Out Cost is the cost of not having a product on the shelf when needed.

• A. Acquisition Cost
• B. Carrying Costs
• C. Procurement Costs
• D. Stock Out Cost

Answer: (D)

Stock Out Cost is the cost that arises when a product isn’t available to meet customer demand. It captures the penalties and lost revenue from not having the item on the shelf: lost sales, expedited replacements, backorder handling, and potential damage to customer relationships. This focus on the consequences of stockouts distinguishes it from other inventory costs. Acquisition Cost is the purchase price paid to obtain the item, Carrying Costs are the expenses of holding inventory (storage, insurance, obsolescence), and Procurement Costs cover the process-related costs of obtaining goods. Therefore, the term that describes the cost incurred from not having the product available when needed is Stock Out Cost.

Stock Out Cost is the cost that arises when a product isn’t available to meet customer demand. It captures the penalties and lost revenue from not having the item on the shelf: lost sales, expedited replacements, backorder handling, and potential damage to customer relationships. This focus on the consequences of stockouts distinguishes it from other inventory costs. Acquisition Cost is the purchase price paid to obtain the item, Carrying Costs are the expenses of holding inventory (storage, insurance, obsolescence), and Procurement Costs cover the process-related costs of obtaining goods. Therefore, the term that describes the cost incurred from not having the product available when needed is Stock Out Cost.