1. An increase in ordering cost will increase the economic order quantity, holding all other factors constant. True or false?
2. One of the assumptions of the basic EOQ model is that the receipt of inventory is instantaneous. True or false?
3. The production run model is useful when a firm purchases inventory that is delivered over a period of time. True or false?
4. Extra inventory that is used to avoid stockouts is known as:
a) planned shortages.
b) quantity discounts.
c) safety stock.
d) service level.
e) ABC analysis.
5. In making inventory decisions, the purpose of the basic EOQ model is to
a) minimize carrying costs.
b) minimize ordering costs.
c) minimize the sum of carrying costs and ordering costs.
d) minimize customer dissatisfaction.
e) minimize stock on hand.
6. Sensitivity analysis of EOQ refers to
a) the attitude of top management toward the use of the EOQ model.
b) analysis of how much the EOQ will change if different input values are used.
c) an assessment of the impact of obsolescence upon the EOQ.
d) a study of the impact of storing incompatible products in the same warehouse.
e) analysis of the impact of stock shortages on customers or on production.