Western Governors University (WGU) BUS3100 C723 Quantitative Analysis for Business Practice Exam

Question: 1 / 400

What are shortage costs associated with?

The cost of stored items

The costs from not having an item available for sale

Shortage costs are specifically related to the consequences of not having sufficient inventory or an item available for sale when demand arises. When a business faces a shortage, it can lose sales and potential revenue, which directly impacts profitability. Additionally, there may be indirect costs such as damage to customer satisfaction and loyalty, as customers may turn to competitors if their desired products are unavailable.

In contrast, the other options pertain to different inventory-related costs. The cost of stored items involves expenses related to inventory holding, such as warehousing costs, insurance, and obsolescence. Replenishing stock refers to the costs associated with restocking items, which may include ordering costs, shipping, and handling. However, neither of these directly addresses the financial implications of inventory shortages, which are captured accurately by shortage costs.

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The costs of replenishing stock

None of the above

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