Question

Stockout costs...?

a) are equal to inventory holding costs per unit per year
b) are trivial in most cases
c) are difficult to estimate precisely
d) are the same for every product

Answer 1

Stockout costs are challenging to estimate precisely due to their complex nature and variability across different products and situations, unlike the more predictable inventory holding costs.

Step-by-step explanation:

Stockout costs are difficult to estimate precisely because they involve a combination of tangible and intangible factors, such as the cost of lost sales, the additional cost of expediting shipments, and the long-term impact on customer satisfaction and company reputation. Unlike inventory holding costs, which can be calculated based on fixed variables like storage fees, stockout costs fluctuate and are unique to each business situation. Moreover, stockout costs vary greatly between products, as they depend on factors like the product's value, the ease of substitution, and customer demand patterns.