Backorder Costs

Today's financial term of the day is Backorder Costs.

Backorder Costs is the cost that is assumed by a business or company when it cannot fill a particular order and has no choice but to fill it at a later time. The backorder cost can take the form of the cost to replace a particular inventory (a discrete backorder cost), or the resultant effect of having subpar customer service (an intangible backorder cost). The backorder cost is generally computed and displayed per unit.