Question

All of the following statements concerning shortage are true, EXCEPT: Group of answer choices

a. shortage costs are often times just an educated guess because lost customers are hard to quantify
b. shortage costs decrease as inventory on hand increases
c. shortage costs increase as total carrying costs increase
d. shortage costs can relate to temporary, as well as permanent, loss of sales

Answer 1

The correct answer is letter "C": shortage costs increase as total carrying costs increase.

Step-by-step explanation:

A shortage takes place when the quantity demanded is higher than the supply at the current price. Typically, shortages occur because of an increase in demand, a decrease in supply or due to government policies. Shortage costs are those costs a firm is responsible for because the is no enough stock in its inventory. When shortage costs increase, the carrying costs do not necessarily increase.