You have a one-time opportunity to buy an item.It costs $20 and sells for $50.It has $4 salvage value if it does not sell.What is the target service level?
A)50 percent
B)65.21 percent
C)80 percent
D)66.67 percent

Question

Quizplus · Accepted Answer

To find the target service level, we need to use the formula:

Target service level = (selling price - salvage value) / (selling price - cost price)

Plugging in the given values, we get:

Target service level = (50 - 4) / (50 - 20)
                   = 46 / 30
                   = 1.533

Converting this to a percentage, we get:

Target service level = 153.3%

Since this is greater than 100%, it means that we are guaranteed to sell the item, i.e., there is zero chance of it not selling. Therefore, the best choice is not to buy the item.

You Have a One-Time Opportunity to Buy an Item