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
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| Chapter 12: Managing Inventory
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| Self-Study Quizzes
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| Multiple Choice
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This activity contains 17 questions.
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| ABC analysis divides an organization's on-hand inventory into three classes based upon
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| The difference(s) between the basic EOQ model and the production order quantity model is (are) that
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| Extra units that are held in inventory to reduce stockouts are called
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| Inventory record accuracy would be decreased by
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| The two most important inventory-based questions answered by the typical inventory model are
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| The appropriate level of safety stock is typically determined by
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| Which of the following is NOT a type of inventory?
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| In the probabilistic model, increasing the service level will
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| A system that triggers ordering on a uniform time basis is called a
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| A company wishes to determine the EOQ for an item that has an annual demand of 2,000 units, a cost per order of $75, and annual carrying cost of $7.50 per unit. What is the EOQ?
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A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for
this item?
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| A store wants to ensure a shelf full of marshmallow peeps as the holiday season approaches. Daily demand for peeps is normally distributed with a mean of 25 and a standard deviation of 5. Lead time is 3 days and the store intends a 98% service level. What is their reorder point?
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A production facility is trying to expand production on a machine that is currently used to produce one part. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What percentage of the time are
they using this machine?
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| Policies based on ABC analysis might include investing
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| A system that keeps track of each withdrawal or addition to inventory continuously is
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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.