The optimal safety stock level is the quantity of safety stock that minimizes the sum of the annual relevant ________.
A) stockout costs and carrying costs
B) ordering costs and carrying costs
C) ordering costs and stockout costs
D) ordering costs and purchasing costs

Question

Quizplus · Accepted Answer

The optimal safety stock level is determined by balancing the trade-off between stockout costs (from not having enough inventory to meet demand) and carrying costs (from holding excess inventory). Therefore, the optimal safety stock level is the quantity that minimizes the sum of these two costs, which is represented by choice A. Ordering costs and purchasing costs are not relevant to determining the optimal safety stock level.

The Optimal Safety Stock Level Is the Quantity of Safety