Which of the following statements about forecasting accuracy is true?

Choosing the statement that low accuracy can increase costs reflects an important understanding of the implications of forecasting in resource planning and management. When forecasts are inaccurate, it can lead to a variety of operational inefficiencies. For instance, poor demand forecasts may result in overproduction, leading to excess inventory costs, or underproduction, which can result in stockouts and lost sales. Both scenarios can significantly impact overall costs and profit margins.

Accurate forecasting helps in better decision-making and resource allocation, ensuring that production levels align with market demand. Consequently, businesses strive to improve their forecasting processes to minimize costs associated with waste and inefficiency. High accuracy in forecasts translates into more effective inventory management, procurement, and overall operational effectiveness, reinforcing why this statement accurately captures the essence of the relationship between forecasting accuracy and operational costs.