Question

In: Finance

Which of the following is true of the EOQ model? Note that the optimal order quantity,...

Which of the following is true of the EOQ model? Note that the optimal order quantity, Q*, will be called EOQ.

If the annual sales, in units, increases by 10%, then EOQ will increase by 10%.

If the average inventory increases by 10%, then the total carrying costs will increase by 10%.

If the average inventory increases by 10% the total ordering costs will increase by 10%.

At any order quantity below the EOQ, then total carrying costs increase, but ordering costs decrease.

If the fixed per order cost increases by 10%, then EOQ will increase by 10%.

Solutions

Expert Solution

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

Which of the following is NOT an assumption of the traditional economic order quantity (EOQ) model?...
Which of the following is NOT an assumption of the traditional economic order quantity (EOQ) model? a. Holding and ordering costs are stable and known. b. Demand is constant and known. c. Supply lead time is constant and known. d. Quantity discounts are possible. Kim’s Nail Salon uses a weighted moving average method to forecast demand. She assigns a weight of 5 to the previous month’s demand, 3 to demand two months ago, and 2 to demand three months ago....
1. Consider the basic EOQ model (no uncertainty). Optimal order quantity (Q ∗) is 1,800 units....
1. Consider the basic EOQ model (no uncertainty). Optimal order quantity (Q ∗) is 1,800 units. What is the average inventory level (I ∗)? a. 900 units b. 1,800 units c. 600 units d. 1,000 units e. 3,600 units 2. Consider the basic EOQ model (no uncertainty). Annual holding cost (AHC) is $2,400. Find annual ordering cost (AOC). a. Cannot be answered because there is missing information b. AOC=$0, since there is no uncertainty c. $1,200, since AOC=AHC/2 at economic...
​(EOQ calculations​) A downtown bookstore is trying to determine the optimal order quantity for a popular...
​(EOQ calculations​) A downtown bookstore is trying to determine the optimal order quantity for a popular novel just printed in paperback. The store feels that the book will sell at four times its hardback figures. It​ would, therefore, sell approximately 4 comma 0004,000 copies in the next year at a price of​ $1.50. The store buys the book at a wholesale figure of​ $1. Costs for carrying the book are estimated at ​$0.250.25 a copy per​ year, and it costs...
(EOQ calculations​) A downtown bookstore is trying to determine the optimal order quantity for a popular...
(EOQ calculations​) A downtown bookstore is trying to determine the optimal order quantity for a popular novel just printed in paperback. The store feels that the book will sell at four times its hardback figures. It​ would, therefore, sell approximately 3 comma 000 copies in the next year at a price of​ $1.50. The store buys the book at a wholesale figure of​ $1. Costs for carrying the book are estimated at ​$0.30 a copy per​ year, and it costs...
the primary purpose of the Economic Order Quantity (EOQ) model is to: A. Maximize the customer...
the primary purpose of the Economic Order Quantity (EOQ) model is to: A. Maximize the customer service level B. Calculate the reorder point, so that replenishment take place at the proper time C. Calculate the optimum safety stock level D. None of these answers
The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying...
The Economic Order Quantity (EOQ) model is a classical model used for controlling inventory and satisfying demand. Costs included in the model are holding cost per unit, ordering cost and the cost of goods ordered. The assumptions for that model are that only a single item is considered, that the entire quantity ordered arrives at one time, that the demand for the item is constant over time, and that no shortages are allowed. Suppose we relax the first assumption and...
Apply the EOQ model to the following quantity discount situation in which D = 450 units...
Apply the EOQ model to the following quantity discount situation in which D = 450 units per year, Co = $42, and the annual holding cost rate is 20%. Discount Category Order Size Discount (%) Unit Cost 1   0 to 99 0 $12.00   2   100 or more 3 $11.64   What order quantity do you recommend? If required, round your answer to the nearest whole number.
Apply the EOQ model to the following quantity discount situation in which D = 400 units...
Apply the EOQ model to the following quantity discount situation in which D = 400 units per year, Co = $36, and the annual holding cost rate is 25%. Discount Category Order Size Discount (%) Unit Cost 1   0 to 99 0 $10.00   2   100 or more 4 $9.60   What order quantity do you recommend? If required, round your answer to the nearest whole number. ***answer is not 4
Consider a basic economic order quantity (EOQ) model with the following characteristics: Item cost: $15 Item...
Consider a basic economic order quantity (EOQ) model with the following characteristics: Item cost: $15 Item selling price: $20 Monthly demand: 500 units (constant) Annual holding cost: $1.35 per unit Cost per order: $18 Order lead time: 5 working days Firm's work year: 300 days (50 weeks @ 6 days per week) Safety stock: 15% of monthly demand For this problem, determine the values of: Q* the optimal order quantity and reorder point. Select one: a. 400 and 100 b....
The simple economic order quantity (EOQ) model shows how much to order (i.e., lot size) in...
The simple economic order quantity (EOQ) model shows how much to order (i.e., lot size) in terms of holding costs, setup (ordering) costs, and total inventory cost.  In terms of this model, why is it necessary to reduce setup cost if we desire smaller lot sizes? Draw the inventory cost curves diagram and fully explain.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT