What Is the Advantage of Maintaining Buffer Stocks of Inventory

question 103

Multiple Choice

What is the advantage of maintaining buffer stocks of inventory?

• A)It brings down storage costs.
• B)It supports a JIT inventory system.
• C)It helps deal with unpredictable supplies.
• D)It helps quickly identify defective stocks.

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Definitions:

Monthly Target Profit

The profit goal set by a business to achieve within a one-month period.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales, illustrating how revenue growth translates into growth in operating income.

Net Operating Income

A company's revenue minus its operating expenses, excluding tax and interest, representing the profit from core business operations.

Sales Increase

A rise in the amount of products or services sold by a business within a specific period, indicating growth or an uptick in market demand.