Question: Zingerman’s experiences a significant seasonally affect to its business, particularly during the ... Zingerman’s experiences...

Question: Zingerman’s experiences a significant seasonally affect to its business, particularly during the ... Zingerman’s experiences a significant seasonally affect to its business, particularly during the end of the year holidays. Identify three of Zingerman’s costs that are affected by seasonality and explain how these three costs behave

Expert Solution

Three costs associated with the company, affected by the seasonality are as follows:

1. Inventory carrying cost

2. Stock-out cost

3. Variable cost

Inventory carrying cost increases with the increase in the inventory level and it happens during the festive or holiday season when the demand is particularly high. With an increase in inventory carrying cost, there is a decrease in stock-out cost. Stock-out cost takes place when a customer does not get the product due to the lack of availability of the product. The stock-out cost decreases with the increase in stock-out cost. The investment in variable cost such as material, labor and utility, increases with the holidays. Increase in variable cost is in positive correlation with the inventory carrying cost, but it is negatively correlated with the stock-out cost. Thus, these costs not always behave in the same direction and have the ability to counterbalance each other.

keosha answered 8 months ago

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