In specifying an (R,Q) ordering policy, the choice of R depends largely on:
A)How shortage costs are measured
B)Fixed ordering costs
C)Nonfinancial holding costs
D)Financial holding costs

Question

Quizplus · Accepted Answer

The choice of R in an (R,Q) ordering policy depends largely on how shortage costs are measured. It is important to set R at a level that minimizes the total costs of the inventory system, taking into account both the costs of holding inventory and the costs associated with shortages. Therefore, understanding how shortage costs are measured is critical in making the right choice for R.

In Specifying an (R,Q) Ordering Policy, the Choice of R