Deck 7: the Economic Order Quantity Model

Question 1

At the economic order quantity,what is the relationship between annual holding cost and annual order cost?

A)Annual holding cost is less than annual order cost
B)Annual holding cost equals annual order cost
C)Annual holding cost is greater than annual order cost
D)There is no relationship
E)It depends on annual demand

Answer 1

Annual holding cost equals annual order cost

Question 2

More inventory in the plant means that less control is needed since the chance of running out is much lower.

Answer 2

False

Question 3

What are the advantages of implementing the EOQ model?

Answer 3

"The advantages are,effective control on cost of inventory management,control of the costs,pricing schemes for products,and effectively manage suppliers and inventory.
"

Question 4

To what type of inventory does the EOQ model apply?

Question 5

Which of the following is not an assumption of the basic EOQ model?

A)Rate of demand is constant
B)Shortages are not allowed
C)Delivery is gradual
D)Lead times are known with certainty
E)Purchase price,ordering cost,and per‐unit holding cost are independent of quantity ordered
F)Items are ordered independently of each other

Question 6

With the basic EOQ model,we want stock replenishment to arrive exactly when the inventory drops to zero.

Question 7

In the Economic Order Quantity Model,what effect would a change in the cost of goods have on decisions such as when to restock or how much to stock as inventory for a company? Why?

Question 8

At the optimal order quantity,total annual holding cost will equal total annual order cost.