Because of Uncertainty of Demand, a Firm May Choose to Hold

question 7

Multiple Choice

Because of uncertainty of demand, a firm may choose to hold an additional amount of inventory called:

• A)reorder stock.
• B)economic order quantity stock.
• C)safety stock.
• D)transit stock.

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Definitions:

Direct Labor Budget

A financial plan that forecasts the costs associated with the labor directly involved in the production of goods or services.

Direct Labor-Hour

A metric indicating the total hours worked by employees directly involved in the production process, often used for costing purposes.

Labor Rate

The amount paid to an employee per unit of time, usually per hour or year.

Direct Materials Purchase Budget

A financial plan that estimates the quantities and costs of direct materials to be purchased to meet production requirements.