Examice

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Question 115

Which of the following attributes best represents how an organization regards the relationship between the cost of lost sales and inventory costs?

Willingness to spend increasing amounts on inventory to decrease lost sales at a greater rate

Willingness to spend increasing amounts on inventory but expect only minor changes in lost sales

Unwillingness to spend increasing amounts on inventory because they see no correlation between inventory costs and the cost of lost sales

Unwillingness to spend increasing amounts on inventory even though they understand that an inverse relationship exists between inventory costs and the cost of lost sales

Correct Answer: A

An organization that regards the relationship between the cost of lost sales and inventory costs is likely willing to spend increasing amounts on inventory to decrease lost sales at a greater rate. This demonstrates a strategic approach where the organization understands that by investing more in inventory, they can significantly reduce lost sales and thus potentially increase profitability.

Discussion

am2005Option: B

The attribute that best represents how an organization regards the relationship between the cost of lost sales and inventory costs is: B. Willingness to spend increasing amounts on inventory but expect only minor changes in lost sales.This option indicates that the organization recognizes the correlation between inventory costs and the cost of lost sales and is willing to invest more in inventory to mitigate lost sales. However, it also implies that the organization understands that there may only be minor changes in lost sales despite increasing inventory costs. This balanced approach suggests that the organization acknowledges the importance of managing inventory costs while addressing the impact of lost sales on overall profitability.