Operations Management
17th Edition
ISBN: 9781259142208
Author: CACHON, Gérard, Terwiesch, Christian
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 6CQ
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To identify: The impact on the sum of ordering and holding costs.
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If the order quantity doubles but the flow rate remains constant, what happens to thesum of ordering and holding costs?a. Decreases by 50 percentb. Decreases by less than 50 percentc. Remains unchangedd. Increases by less than 50 percente. Increases by 50 percent
Assuming constant annual demand for an item, increasing its orderquantity:
A. Increases the number of orders placed per year.B. Increases the total annual purchasing cost.C. Increases the total annual inventory carrying costs.D. Decreases the number of orders placed per year
If the order quantity doubles but the flow rate remains constant, what happens to theaverage amount of time a unit spends in inventory?a. Decreases by more than 50 percent d. Increases by 50 percentb. Decreases by 50 percent e. Increases by more than 50 percentc. Remains unchanged
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Operations Management
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- For a company operating 300 days a year, the annual demand is 63,000 units, the lead time is 4 days, the ordering cost per order is BD 80 and the inventory turnover is 12, the reorder point is A. Every 12 days B. Every 4 days C. When 175 units remain D. When 840 units remainarrow_forwardWhich of the following is NOT an assumption of the EOQ model?a. It is possible to receive a purchase discount if the order quantity is sufficiently large.b. There is a fixed cost to submit each order that is independent of the amount ordered.c. Demand occurs at a constant rate per unit of time.d. There is a cost to hold each unit of inventory per unit of timearrow_forwardAt sejahtera.com, a large retailer of popular books, demand is constant at 32,000 books per year. The cost of placing an order to replenish stock is $10, and the annual cost of holding is $4 per book. Stock is received five working days after an order has been placed. The backordering is not allowed. Assume 300 working days a year. a. calculate sejahtera.com’s optimal order quantity. b. calculate the optimal number of orders per year c. Calculate the optimal interval (in working days) between orders. d. Determine the demand during the lead time. e. Determine the reorder point. f. Determine the inventory position immediately after an order has been placed. g. Draw the model to represent the case.arrow_forward
- The EOQ is optimal because it a. minimizes the total inventory cost. b. minimizes the ordering cost of inventory. c. minimizes the holding cost of inventory. d. maximizes the on-hand inventory. e. does none of these.arrow_forwardWhich of the following statements is false? a. Ordering in smaller lot sizes lead to lower inventory holding costs. b. Seasonal inventory is stored to cater predictable surge in demand. c. Cycle inventory is the average amount of inventory used to satisfy demand between replenishments. d. Safety inventory is kept when the demand is less than supply.arrow_forwardThe basic EOQ model is based on all the following assumptions except: * A. Annual demand is known and constant.B. The item is always available when needed.C.Estimates of ordering and carrying costs are accurate.D.Order is instantaneously received exactly when previous inventory has just been used up.arrow_forward
- The basic EOQ model is based on all the following assumptions except: A. Annual demand is known and constant.B. The item is always available when needed.C. Estimates of ordering and carrying costs are accurate.D. Order is instantaneously received exactly when previous inventory has just been used up.arrow_forwardYou are managing a company that stocks and distributes hardware. Thecompany employs two purchasing agents who receive combined salaries of$90,000. They process 6,000 purchase requests per year. Average inventoryin storage is $600,000, and the total cost of running the warehouse is$200,000. You are told that the company purchases 5,000 hammers per yearat a cost of $5.34 per hammer.a. Using the economic order quantity (EOQ) formula, how many hammersshould be ordered at one time?b. If the hammer vendor stated that it would charge $5.00 per hammer if youordered 200 or more at a time, what should you do?arrow_forwardThe best quantity to order One of the formulas for inventorymanagement says that the average weekly cost of ordering, payingfor, and holding merchandise iswhere q is the quantity you order when things run low (shoes,TVs, brooms, or whatever the item might be); k is the cost ofplacing an order (the same, no matter how often you order); c isthe cost of one item (a constant); m is the number of items soldeach week (a constant); and h is the weekly holding cost per item(a constant that takes into account things such as space, utilities,insurance, and security). Find dA>dq and d2A>dq2.arrow_forward
- In the basic EOQ model, the average inventory level is equal to one-halfthis value: A. Maximum inventory level.B. Order quantity.C. Reorder pointD. Both A and B.arrow_forwardMost inventory models attempt to minimize a. The likelihood of stockout b. None of these c. The numbers of orders placed d. Total inventory-based cost e The number of items orderedarrow_forwardScouts Corp. projects its sales to be 1,000 units this year. As a result of holding inventories, insurance, storage, taxes and other cost are incurred amounted to P2 per unit per year. Every time Scouts Corp. makes an order, P10 is incurred. On the average it takes 3 days to make and receive an order. (Use 360 days a year). Assuming Scouts Corp.’s inventory may take as 5 days to respond, how many units of inventory is the average daily usage? and what is the normal lead time usage?arrow_forward
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