Question

The Acme Toy Company introduced a new electric train, the Silver Bullet, in its Christmas catalog last year. Within four days of the catalog's mailing date, Acme had received phone orders for its entire inventory of trains. Paul Murrah, the sales manager responsible for the Silver Bullet, was delighted with the product's success. However, his excitement was overshadowed by the ____ cost resulting from lost sales that his division would suffer.

Answer 1

Answer:

Stock out

Explanation:

Stockout cost can be regarded as lost of income as well as expenses which is as a result of shortage of inventory.

These can come up in different vways such as

✓Sales-related way; instance of these is when there is an order been placed by a customer but inventory is not available to sell to him/her gross margin that is related to sale would be loss by the company.

✓Internal process-related; this is when there is no inventory for a production run when the company needs it, then cost will be incurred in getting it even on short notice.