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D. Storage vMotion
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If a just-in-time purchasing policy is successful in reducing the total inventory costs of a manufacturing company, which of the following combinations of cost changes would be most likely to occur?
A. An increase in quality costs and a decrease in ordering costs.
B. An increase in purchasing costs and a decrease in quality costs.
C. An increase in purchasing costs and a decrease in stockout costs.
D. An increase in stockout costs and a decrease in carrying costs.
Answer: D
Explanation:
In this situation, the company will be receiving fewer materials at any point in time, increasing the likelihood of stockout and thereby resulting in an increase in a reduction in the carrying cost. At the same time, the average inventory will be less, resulting in a reduction in the carrying cost.
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