If D Represents the Level of Decentralization of Corporate Decision-Making

question 21

Multiple Choice

If D represents the level of decentralization of corporate decision-making, then Benefits = B*D and Costs = A*D + C*D². The optimal level of decentralization occurs where the:

• A) horizontal distance between benefits and costs is greatest.
• B) vertical distance between benefits and costs is greatest.
• C) sum of the squares of the distance between benefits and costs is minimized.
• D) level of benefits is greatest.

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Definitions:

Lost Sales

The potential revenue that a company misses out on due to being out of stock, having insufficient capacity, or other reasons for not fulfilling customer demand.

Quantity Discounts

Price reductions applied to bulk purchases, incentivizing buyers to increase the volume of their purchase.

Annual Carrying Costs

The total expenses associated with holding or storing inventory over a year, including costs related to storage, insurance, and obsolescence.

Ordering Costs

Expenses associated with making an order for goods or services, including administrative costs, shipping charges, and time spent on ordering processes.