When considering safety stock and its effect on EOQ, which of the following statements is false?
A) Safety stock is equal to the potential excess usage of an input.
B) The reorder point is affected by the existence of safety stock.
C) Safety stock decreases inventory holding costs.
D) Safety stock decreases the potential costs caused by inventory shortages.
E) Fluctuations in monthly usage of a material indicate the desirability of a safety stock.

Question

Quizplus · Accepted Answer

Safety stock increases inventory holding costs because it involves keeping additional inventory on hand to mitigate the risk of stockouts, which requires more storage space and incurs higher costs associated with maintaining the extra inventory.

When Considering Safety Stock and Its Effect on EOQ, Which