Because managing inventory is just like managing any other investment, decisions about the level of inventory should be guided by
A) the value of the inventory.
B) the effect of inventory levels on sales.
C) a cost-benefit analysis.
D) the effect of inventory levels on customer relations.

Question

Quizplus · Accepted Answer

A cost-benefit analysis should be used to guide decisions about inventory levels. This involves weighing the costs of holding inventory (such as storage, handling, insurance, and the opportunity cost of tying up capital) against the benefits (such as being able to meet customer demand, avoiding stockouts, and taking advantage of volume discounts). While the value of the inventory, its effect on sales, and its impact on customer relations are all important factors to consider, they should be weighed against the costs and benefits of holding inventory to determine the optimal level.

Because Managing Inventory Is Just Like Managing Any Other Investment