Question

A(n) _____ is the amount of inventory that results in the minimum cost, considering the cost of lost sales resulting from running out of stock, the number of units sold per day, and the number of days required to receive inventory.

A. microinventory
B. periodic inventory
C. EOQ
D. optimum stocking level

Answer 1

The correct answer is C. EOQ, which stands for Economic Order Quantity. EOQ is the amount of inventory that minimizes cost by considering factors such as lost sales and lead time.

Step-by-step explanation:

The correct answer to the question is C. EOQ, which stands for Economic Order Quantity. Economic Order Quantity is the amount of inventory that results in the minimum cost, taking into account the cost of lost sales due to stockouts, the number of units sold per day, and the lead time to replenish inventory.

For example, let's say a store sells 50 units of a product per day, and it takes 5 days to receive inventory. The EOQ would be the ideal amount of inventory to order at once to minimize costs while avoiding stockouts.

Calculating the EOQ involves considering the carrying cost of inventory, the cost of placing an order, and the demand for the product. By finding the point where these costs are minimized, a business can determine the optimal stocking level.

Answer 2

The correct option here is D) optimum stocking level.

Step-by-step explanation:

Optimum stocking level can also be termed as optimal stocking level or optimal inventory level, which represents the amount of quantity that covers all the sales in a given period between the two stock arrivals. When the inventory is at optimal level it means the cost incurred would be less , as inventory is required to support sales which means less warehouse space and capital is needed, that will lead to higher return on investment.