Question

Explain in detail the following questions #1-3

1. Explain WITH an example of how to use Economic Order Quantity (EOQ).
2. What can EOQ can tell you?
3. In the process of an economic order quantity (EOQ) inventory analysis, if the holding cost for an item doubles and all other parameters remain unchanged, which of the following will happen?
   1. The order quantity will increase,, and the reorder point will decrease.
   2. The order quantity will increase, and the reorder point will increase
   3. The order quantity will decrease, and the reorder point will remain unchanged.
   4. The order quantity will remain unchanged, and the reorder point with increase.
4. According to the economic order quantity (EOQ) inventory model, if the lead time is doubled, the order quantity will.
   1. Decrease by half
   2. Remain unchanged
   3. Increase by an amount equal to the square root of 2
   4. Double
5. In inventory management, the requirement of cycle counting includes all of the following EXCEPT
   1. Closing the facility to ensure accurate inventory counts
   2. Reconciling inventory counts with inventory records
   3. Dividing inventory into classes
   4. Counting the inventory frequently

Answer 1

What is EOQ.

The EOQ could even be a company's optimal order quantity that minimizes its total costs related to ordering, receiving, and holding inventory.

The EOQ formula is always best applicable in situations where demand, ordering, and holding costs remain constant over the time.

Example of the because of Use EOQ

Assume a retail clothing shop selling men’s jeans, and thus the sells 1,000 pairs of jeans annually . It costs $5 the company once a year to hold a pair of jeans in inventory, and thus the charge to place an order is $2.

The EOQ formula is that the premise of (2 x 1,000 pairs x $2 order cost) / ($5 holding cost) or 28.3 with rounding. the proper order size to attenuate costs and meet customer demand is slightly quite 28 pairs of jeans. The reorder point is provided by a more complex portion of the EOQ formula.

ANS.1) "C" The order quantity will decrease, and the reorder point will remain unchanged.

ANS.2)"A" Decreased by half

ANS.3) "A" Closing the facility to ensure accurate inventory counts