Safety stock
A)can be determined by the EOQ formula.
B)depends on the inventory position.
C)depends on the variability of demand during lead time.
D)is not needed if Q* is the actual order quantity.

Question

Quizplus · Accepted Answer

Safety stock is used to account for the variability in demand during lead time. It is calculated to ensure that the inventory level does not fall below the desired level during the time it takes to receive a new shipment. The EOQ formula and inventory position do not directly determine safety stock, although they may affect the overall inventory levels that influence the need for safety stock. Even if Q* is the actual order quantity, safety stock may still be needed to account for unexpected fluctuations in demand.

Safety Stock