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AICPA CPA-Business Exam - Topic 2 Question 16 Discussion

The amount of inventory that a company would tend to hold in safety stock would increase as the:
A) Cost of carrying inventory decreases.
B) Variability of sales decreases.
C) Costs of running out of stock decreases.
D) Length of time that goods are in transit decreases.

AICPA CPA-Business Exam - Topic 2 Question 16 Discussion

Actual exam question for AICPA's CPA-Business exam
Question #: 16
Topic #: 2
[All CPA-Business Questions]

The amount of inventory that a company would tend to hold in safety stock would increase as the:

Show Suggested Answer Hide Answer
Suggested Answer: A

Choice 'a' is correct. As the cost of carrying inventory decreases, safety stock would tend to increase to reduce the risk of stock outs.

Choice 'b' is incorrect. As sales become more predictable (sales variability decreases), less (not more) safety stock would be needed because the risk of stock outs would have decreased.

Choice 'c' is incorrect. If the cost of stock outs decrease, safety stock would decrease.

Choice 'd' is incorrect. If lead-time decreases, safety stock would decrease.


by Chauncey at May 06, 2022, 08:46 AM

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Macy
11 months ago
D sounds right too, shorter transit times should reduce safety stock needs!
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Eladia
11 months ago
Wait, are we sure about C? That seems off to me.
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Trinidad
11 months ago
I think B is more accurate, less variability means less need for safety stock.
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Kati
11 months ago
Totally agree, A makes the most sense!
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Louis
12 months ago
Safety stock goes up when carrying costs drop.
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Margart
12 months ago
Hmm, I'm not totally sure about this one. I know Avaya Aura Contact Center has a lot of different components, and I'm not super familiar with all of them. I'll have to think this through carefully.
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Melinda
12 months ago
I'm pretty confident the answer is B. Automated Personalization is all about using machine learning to dynamically personalize the experience for each visitor, so the system should be able to figure out the best goal to optimize towards.
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Shelia
12 months ago
I've got this! The number of ways to choose 4 heads out of 7 tosses is 7 choose 4, which is 35. That's the answer.
upvoted 0 times
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