The Costs of Overstocking and Understocking Have a Direct Impact

question 69

Multiple Choice

The costs of overstocking and understocking have a direct impact on

• A) the optimal cycle service level but not profitability.
• B) profitability but not the optimal cycle service level.
• C) both the optimal cycle service level and profitability.
• D) neither the optimal cycle service level or profitability.

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Definitions:

Asset

Items of value owned by a company, including tangible and intangible resources, that can be converted into cash.

Second-Year Depreciation

The depreciation expense allocated in the second year of an asset's useful life, considering the chosen depreciation method.

Straight-Line Method

A depreciation method applying an equal expense rate each year over the useful life of the property.

Estimated Residual Value

The anticipated market value of an asset at the end of its useful life, used in calculating depreciation.