Question

Chapter 7 introduces several costs that influence the determination of the proper number of distribution locations a firm needs to serve its customer base. Which one of the following is an opportunity cost associated with that decision?

a) warehouse costs
b) inventory costs
c) transportation costs
d) cost of poor service
e) workers' compensation costs

Answer 1

The opportunity cost associated with deciding the number of distribution locations is the cost of poor service.

Step-by-step explanation:

The opportunity cost associated with determining the proper number of distribution locations is the cost of poor service.

When a firm decides to have fewer distribution locations, it may result in poor service to customers. This means that customers may experience delays or other issues with receiving their products, which can negatively impact customer satisfaction and loyalty. Therefore, the cost of poor service is an opportunity cost that firms need to consider when making decisions about the number of distribution locations.