Comprehensive and Detailed In-Depth Explanation:

In SAP EWM, physical inventory (PI) procedures can be restricted to specific warehouse areas. Option C ("You define an activity area and assign this to the physical inventory area") is correct because the activity area, which groups storage bins for specific activities (e.g., counting), is linked to a PI area in SPRO: SCM Extended Warehouse Management > Physical Inventory > Define Physical Inventory Area. This controls where PI procedures apply. Option A (queue) relates to resource management, option B (direct bin assignment) bypasses the PI area concept, and option D (storage section) is a lower-level structure not directly tied to PI control.