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AICPA Exam CPA-Business Topic 3 Question 99 Discussion
Topic #: 3
Assume that each day a company writes and receives checks totaling $10,000. If it takes five days for the checks to clear and be deducted from the company's account, and only four days for the deposits to clear, what is the float?
Choice 'd' is correct. Reorder costs do not impact the level of safety stock.
Choices 'a', 'b', and 'c' are incorrect. Safety stock levels are affected by:
1. Uncertain sales forecasts - greater uncertainty means a higher level of safety stock should be carried.
2. Dissatisfaction of customers - if customers are dissatisfied with back orders (which occur when there are stock outs), then more safety stock should be carried to prevent stock outs.
3. Uncertain lead times - greater uncertainty means a higher level of safety stock is needed.
Judy
4 days ago