Reduction in the optimal order quantity

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Reference no: EM13841424

True or False?

1. In the production-run EOQ model, if usage and production/delivery rates are equal, there will be no inventory build up, and thus the order quantity cannot be calculated.

2. Using the basic EOQ model, the higher an item’s holding costs, the more frequently it will be ordered.

3. In the basic EOQ model, ½ the ordering cost results in approximately a 29% reduction in the optimal order quantity

4. For the Planned Shortages model, if the holding cost and the shortage penalty cost are equal, then the maximum inventory level will be 71% of that predicted by the basic EOQ model.

5. For the Production-Lot model, if demand is ¾ the production rate, then the maximum inventory level will decrease by 75%.

Reference no: EM13841424

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