ACCA CAT EXAMINATION (9 DEC 2004) QUESTION 9

The following relate to the management of raw materials:
I) holding costs per unit of stock would increase;
ii) the economic order quantity would decrease;
iii) average stock levels would increase;
iv) total ordering costs would decrease.

Which of the above would result from the introduction of buffer (safety) stocks?

A. (iii) only
B. (ii) and (iii) only
C. (ii), (iii) and (iv) only
D. (I), (ii), (iii) and (iv)