If the MPS Is Only Half as Large as the MPC

question 198

Multiple Choice

If the MPS is only half as large as the MPC, the multiplier:

• A)is 2.
• B)is 3.
• C)is 4.
• D)cannot be determined from the information given.

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Definitions:

Safety Stocks

Additional quantities of inventory maintained to guard against uncertainties in demand or supply, ensuring that out-of-stock situations are minimized.

Economic Order Quantity

A formula designed to determine the optimal order size to minimize the costs of holding and ordering inventory.

Net Present Value

The calculation of the present value of an investment's expected cash inflows minus the costs.

Cash Sales Policy

A policy adopted by businesses that requires all purchases to be paid for in cash at the time of sale.