The Appropriate Level of Safety Inventory Is Determined by the Uncertainty

question 31

True/False

The appropriate level of safety inventory is determined by the uncertainty of both demand and supply and the desired level of cycle inventory.

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Definitions:

Wheat

A cereal grain that is a worldwide staple food, used to make a wide range of products including bread, pasta, and cereal.

Price

The amount of money required to purchase a good or service; determined by factors such as demand, supply, and production cost.

Shutdown Point

The lowest point on the average variable cost curve. When price falls below the minimum point on AVC, total revenue is insufficient to cover variable costs and the firm will shut down and bear losses equal to fixed costs.

Farmer

An individual engaged in agriculture, raising living organisms for food or raw materials, typically leading the operation of farms or animal husbandry.