APICS Certified in Logistics, Transportation and Distribution (CLTD) — Question 99

Which of the following attributes best represents how an organization regards the relationship between the cost of lost sales and inventory costs?

Answer options

• A. Willingness to spend increasing amounts on inventory to decrease lost sales at a greater rate
• B. Willingness to spend increasing amounts on inventory but expect only minor changes in lost sales
• C. Unwillingness to spend increasing amounts on inventory because they see no correlation between inventory costs and the cost of lost sales
• D. Unwillingness to spend increasing amounts on inventory even though they understand that an inverse relationship exists between inventory costs and the cost of lost sales

Correct answer: C

Explanation

The correct answer, C, indicates that the organization does not want to invest more in inventory since they believe there is no link between inventory costs and lost sales. Options A and B reflect a willingness to invest more, which contradicts the premise of C. Option D acknowledges a relationship but still expresses unwillingness to increase spending, making it less aligned with the organization's views.