Shortage costs include

Question

Quizplus · Accepted Answer

Shortage costs refer to the costs incurred due to a shortage of inventory, such as production stoppages and lost customer goodwill. Additionally, shortage costs can also include expedited shipping costs to replenish inventory, which can increase order costs. Option A is incorrect as it describes all costs that increase with increased current assets, rather than specifically shortage costs. Option C is incorrect as it describes benefits or advantages that can come from an optimal inventory level, rather than costs associated with a shortage of inventory. Option D is incorrect as it does not accurately describe shortage costs. Option E is partially correct in that a shortage of inventory can lead to stockouts, but it does not fully capture the costs associated with a shortage.

Shortage Costs Include