Question

Sunshine Restaurant has a problem of always over-stocking on items that are on sale. As a result, they produce too many menu items that contribute to wastage issue. From cost control point of view, what are the possible consequences of the over-stocking issue? You can answer in a few sentences.

Answer 1

Over-stocking at Sunshine Restaurant leads to increased food waste, tied-up capital, and higher costs for storage and inventory management.

Step-by-step explanation:

From a cost control perspective, the Sunshine Restaurant's issue of over-stocking on sale items can lead to several negative consequences. Firstly, it can cause an increase in food waste, as items that are not sold before their expiration date must be discarded. This wastage issue not only represents lost revenue but also contributes to higher disposal costs. Secondly, over-stocking ties up capital in inventory that could be otherwise used for operational necessities or investments. Lastly, the practice of over-stocking can lead to additional costs in storage and management of the excessive inventory, potentially requiring more space, equipment, and labor to handle the surplus.