The cost of understocking is denoted by Cu and is the margin lost by a firm for each lost sale because there is no inventory on hand.

Question

Quizplus · Accepted Answer

This statement correctly defines and denotes the cost of understocking, which represents the loss of potential revenue due to stockouts or unfulfilled customer demand. The cost of understocking can include lost sales, dissatisfied customers, reduced market share, and damage to the firm's reputation. Therefore, it is important for businesses to balance their inventory levels and avoid stockouts as much as possible.

The Cost of Understocking Is Denoted by Cu and Is