SCM 564 Module 7

When there are no errors in the input parameters for demand, ordering costs, and handling costs, the error factor is __________.

1

For the EOQ model, which of the following relationships is incorrect?

As the order quantity increases, annual ordering cost increases.

When quantity discounts are available, order an amount from the highest discount category.

False

For a particular item, your EOQ = 57 and demand and lead times are known without variation. The associated holding costs are $257.75. What is the relevant total cost for this ordering policy?

TRC = 2(257.75) = $515.50

When demand is independent, it is not related to demand for other components or items produced by the firm.

True

Which cost would not be considered part of a holding cost?

shipping cost

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

the Q* to increase

For inventory systems with constant demand and a fixed lead time, __________.

the reorder point = lead-time demand.

Which errors have the larger effect, underestimated or overestimated errors for the input parameters (demand, ordering, or holding)?

underestimated error factors