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AICPA CPA-Business Exam - Topic 2 Question 15 Discussion

The level of safety stock in inventory management depends on all of the following, except the:
D) Cost to reorder stock.
A) Level of uncertainty of the sales forecast.
B) Level of customer dissatisfaction for back orders.
C) Level of uncertainty in lead-time for stock shipments.

AICPA CPA-Business Exam - Topic 2 Question 15 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 15
Topic #: 2
[All CPA-Business Questions]

The level of safety stock in inventory management depends on all of the following, except the:

Show Suggested Answer Hide Answer
Suggested Answer: D

Choice 'd' is correct. Reorder costs do not impact the level of safety stock.

Choices 'a', 'b', and 'c' are incorrect. Safety stock levels are affected by:

1. Uncertain sales forecasts - greater uncertainty means a higher level of safety stock should be carried.

2. Dissatisfaction of customers - if customers are dissatisfied with back orders (which occur when there are stock outs), then more safety stock should be carried to prevent stock outs.

3. Uncertain lead times - greater uncertainty means a higher level of safety stock is needed.


by Carey at May 03, 2022, 02:12 PM

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Tori
8 months ago
Not sure about that last one, seems like it could impact decisions.
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Miss
9 months ago
Wait, are we really saying reorder costs don't matter?
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Xochitl
9 months ago
I think customer dissatisfaction should be a factor, though.
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Vashti
9 months ago
Totally agree, lead-time uncertainty matters too!
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Daniel
9 months ago
Safety stock is definitely influenced by sales forecast uncertainty.
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Tyisha
9 months ago
I'm a bit unsure about this one. The options don't seem super clear to me. I might have to do some quick research on character encoding conversion tools before making a guess.
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Janine
9 months ago
This looks like a classic set theory problem. I think I can solve this by using the inclusion-exclusion principle.
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Franklyn
9 months ago
Hmm, this is a tricky one. I'll need to carefully consider the options and think about the key characteristics of a ready product backlog item.
upvoted 0 times
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