As the ratio of the cost of overstocking to the cost of understocking gets smaller,
A)the optimal level of product availability becomes irrelevant.
B)the optimal level of product availability decreases.
C)the optimal level of product availability remains stable.
D)the optimal level of product availability increases.

Question

Quizplus · Accepted Answer

As the ratio of the cost of overstocking to the cost of understocking gets smaller, the cost of understocking becomes relatively higher. This means that there is a greater cost associated with lost sales due to stockout events, which makes it more beneficial to increase the optimal level of product availability to avoid these costs. Thus, the optimal level of product availability increases.

As the Ratio of the Cost of Overstocking to the Cost