ECONOMICS

Detailed explanation-1: -D. the higher the profit margin per unit, the higher the safety stock necessary. The answer is true regarding safety stock. If the profit per unit is higher, the company is required to maintain higher safety stock.

Detailed explanation-2: -It is a value that you select so that you don’t face a stockout scenario. A lower score means you’ll have higher chances of running out of stock. For instance, if you select a Z score of 2.33, there is a 99% chance that you won’t face a stockout situation.

Detailed explanation-3: -Impact of safety stock on carrying cost The safety stock will result in an increase in the carrying cost of inventory. If an organization keeps a large safety stock, then it will lead to high carrying costs, and even small safety stock will result in a small increase in the inventory carrying cost.

Detailed explanation-4: -Safety Stock with EOQ (Economic Order Quantity) The aim is to minimize the cost of ordering and holding stock, while still meeting demand and service level requirements. The cost of ordering products is made up of the cost of placing your order, delivery, and transportation costs, and the cost of receiving the order.