When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

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Marginal analysis is a decision-making tool that evaluates the costs and benefits of producing or stocking one additional unit. In inventory management, the goal is to maximize profits by stocking just enough inventory to meet demand but not so much that there is excess inventory sitting on shelves. The optimal inventory decision using marginal analysis is to stock that quantity where the marginal profit (i.e., the profit from selling one additional unit) is equal to the marginal cost (i.e., the cost of producing or stocking one additional unit). In other words, the probable profit from the sale of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

When Stocked Items Are Sold, the Optimal Inventory Decision Using