A Company May Wish to Add a Safety Stock If

question 8

Multiple Choice

A company may wish to add a safety stock if it faces uncertain demand.The inventory analyst should modify the following in light of the safety stock:

• A)recompute the average inventory by adding the safety stock amount to the present average inventory balance
• B)recompute the reorder point by adding the safety stock to the present reorder point
• C)recompute EOQ by adding the safety stock to period demand to arrive at a new usage rate
• D)both a and b
• E)both b and c

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Definitions:

Unemployment

Unemployment occurs when individuals who are capable of working and are looking for a job are unable to find employment. It is a key economic indicator.

Money Neutral

The principle that changes in the money supply only affect nominal variables and not real variables like output in the long run.

Favorable Supply Shock

An unexpected event that increases the supply of a product or service, leading to lower prices and benefiting consumers.

Price Level

A measure of the average prices of goods and services in an economy.