The Margin of Safety Is the "Cushion," or Drop in Sales

question 195

True/False

The margin of safety is the "cushion," or drop in sales, a company can absorb without incurring a loss.

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Definitions:

Holding Cost

The expenses associated with storing unsold inventory, including warehousing, insurance, depreciation, and opportunity costs.

Lot Size

The quantity of a particular product that is produced or purchased in a single batch.

Setup

The process of preparing or configuring equipment or a work area for a new production run or task, which can involve adjustments and changeovers.

Kanban Size

The quantity of work or materials designated to trigger production activities in the Kanban system, balancing inventory levels and throughput.