QUESTION 5Increasing the order quantity above the EOQdecreases the annual ordering cost.TrueFalseIncreasing the order quantity above the EOQdecreases the annual holding cost.TrueFalse

Economic order quantity (EOQ) is a calculation used by companies to establish the right order…

Answered: Increasing the order quantity above the…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Wood County Hospital consumes 1,500 boxes of bandages per week. The price of bandages is $36 per box, and the hospital operates 52 weeks per year. The cost of processing an order is $15, and the cost of holding one box for a year is 20 percent of the value of the material. a. The hospital orders bandages in lot sizes of 900 boxes. What extra cost does the hospital incur, which it could save by using the EOQ method? $ 435.37 (Enter your response rounded to two decimal places.) b. Demand is normally distributed, with a standard deviation of weekly demand of 150 boxes. The lead time is 2 weeks. Refer to the standard normal table for z-values. What safety stock is necessary if the hospital uses a continuous review system and a 95 percent cycle-service level is desired? 348 boxes. (Enter your response rounded to the nearest whole number.) What should be the reorder point? boxes. (Enter your response rounded to the nearest whole number.) pm oints
2. Find out the EOQ, Annual ordering cost and annual holding cost from the following information. The demand is 19500 units per year, holding cost is RO 4 per unit for a year and ordering cost is RO 25 order.
If annual demand is 12,000 units, annual holding cost is $15 per unit, and setup cost per order is $25, what is the EOQ lot size?
Palin’s Muffler Shop has one standard muffler that fits a large variety of cars. The shop wishes to establish a periodic review system to manage inventory of this standard muffler. Use the information in the following table to answer the below questions. Annual demand 3,000 mufflers Standard deviation of daily demand 6 mufflers per working day Item cost $30 per muffler Annual holding cost 25% of item value Review period 15 working days Ordering cost $50 per order Service probability 90% Lead time 2 working days Working days 300 per year What is the optimal target level (order-up-to level)? Note: Use Excel's NORM.S.INV() function to find the z value. Round z value to 2 decimal places and final answer to the nearest whole number. If the service probability requirement is 95 percent, the optimal target level will: multiple choice Increase Decrease Stay the same
With a normal demand and normal lead-time, increasing the order lead-time results in which of the following? Lower expected costs. Higher service levels. Higher stockout probability. All of the above.
Which of the following is one of the assumptions of EOQ model? Group of answer choices Annual demand is known and even throughout the year Orders are received partially There are quantity discounts Multiple items are involved Lead time varies
Consider a continuous review inventory system. Demand is normally distributed with an average of 28,000 per month and a monthly standard deviation of 4900 units. Lead time is 3 weeks (assume four weeks per month) (round Z-values, standard deviations to two decimal places). If the firm desires a(n) 90% cycle service level, it should hold enter your response here units of safety stock (round your response to the nearest integer).
Suppose you have a very critical part that is used in the production of your product (so critical that it is impossible to continue production unless it is present). For such a part which of the two inventory control systems could you prefer?: Fixed Order Quantity or Fixed Order Period. Why? Explain briefly
The purpose of computing for EOQ is to put into balance the Carrying Cost and Ordering Cost. Is it True or False?
3
Chase demand strategy allows lower inventories than level strategy. a. True O b. False

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Increasing the order quantity above the EOQ decreases the annual ordering cost. O True O False