The costs of being out of stock and lost customer goodwill are known as:
A) Fixed costs
B) Ordering costs
C) Holding costs
D) Shortage costs
E) None of the above

Question

Quizplus · Accepted Answer

The costs of being out of stock and lost customer goodwill are known as shortage costs. Shortage costs are a result of missed sales opportunities, and customers may switch to a competitor if a product is unavailable, resulting in lost customer goodwill. Fixed costs refer to expenses that do not vary with production level, ordering costs refer to the costs of placing and receiving orders, and holding costs are expenses associated with storing inventory over time.

The Costs of Being Out of Stock and Lost Customer