The Bullwhip Effect Occurs When Slight to Moderate Demand Variability

question 17

True/False

The bullwhip effect occurs when slight to moderate demand variability becomes magnified as demand information is transmitted back upstream.

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Definitions:

Contribution Margin

The amount by which the sale of a product or service exceeds its variable costs, contributing to covering fixed costs and generating profit.

Variable Cost

A cost that varies directly with the level of production or sales volume.

High-low Method

A method applied in cost accounting that calculates fixed and variable expenses by analyzing the maximum and minimum activity levels.

Variable Component

The portion of cost or expense that varies directly with changes in output or activity level.