Answer (D) is correct . Determining the appropriate level of safety stock involves a complex probabilistic calculation that balances (1) the variability of demand for the good, (2) the variability in lead time, and (3) the level of risk the firm is willing to accept of having to incur stockout costs. Thus, the only one of the items listed that does not affect the level of safety stock is reorder costs.
Answer (A) is incorrect because The variability of sales during the lead time is a factor in the size of safety stocks.
Answer (B) is incorrect because The cost of stockouts, including the opportunity cost of customer dissatisfaction, is considered in determining safety stock.
Answer (C) is incorrect because The cost of running out of inventory, often an opportunity cost, is a consideration.
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