The Purpose of Safety Stock Is To

question 15

Multiple Choice

The purpose of safety stock is to:

• A) replace failed units with good ones.
• B) eliminate the possibility of a stockout.
• C) eliminate the likelihood of a stockout due to erroneous inventory tally.
• D) control the likelihood of a stockout due to variable demand and/or lead time.
• E) protect the firm from a sudden decrease in demand.

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Definitions:

Scanlon Plan

A gainsharing program designed to encourage productivity and cost-saving initiatives by sharing the resultant financial gains with employees.

Labour Input

The total hours worked by employees or the effort put in by employees towards the production of goods or services.

Gain-Sharing Plans

Performance-based compensation strategies designed to encourage teamwork and improve productivity by sharing the financial gains with employees.

Historical Baseline

A reference point derived from past data, typically used for comparison with current data to monitor changes or progress over time.