Use Scenario 13.3 to answer the question.What is the cost of understocking?

A) $0.02
B) $0.03
C) $0.04
D) $0.05

Cost of Understocking

The financial loss or missed opportunity cost incurred when inventory levels are too low to meet demand.

Holding Cost

The expenses associated with storing unsold goods or materials, including warehousing, insurance, depreciation, and opportunity costs.

Replenishment Lead Time

Defines the period between placing an order for stock and its delivery, impacting inventory levels and the ability to meet customer demand.