You manage inventory as per the Economic Order Quantity (EOQ) model. However, you realize that you incorrectly specified the fixed cost of ordering. In specific, you underestimated the fixed cost of ordering by a factor of 2, i.e., fixed cost of ordering is actually twice of what you used in your model. Compared to the EOQ quantity obtained with the incorrect ordering cost, your true optimal EOQ quantity: __________ a. increases, but by a factor less than 2 b. decreases c. remains unchanged d. doubles e. more than doubles Show
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This activity contains 17 questions.
Answer choices in this exercise appear in a different order each time the page is loaded. What are the two basic inventory questions answered by the inventory model?We will build an inventory model in order to answer two basic questions: How much do we order? And when? - with the goal of minimizing the total inventory costs. In the most basic of all inventory models we are going to make several important assumptions in order to keep the model simple.
What are the two inventory models?Inventory items can be divided into two main types: Independent demand and dependent demand items. The systems for managing these two types if inventory differ significantly.
What are the two questions answered by the inventory model How are these two questions answered?The two most basic inventory questions answered by the typical inventory model are: A) timing of orders and cost of orders. B) order quantity and cost of orders.
What are the two most important decisions made by the EOQ inventory models?To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and size of orders. In the EOQ formula, holding costs under 10% are expressed as percentages, above 10% are expressed as annual unit costs.
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