16. The Farmingham Company faces very uncertain demand. A simple way of altering

Question

16. The Farmingham Company faces very uncertain demand. A simple way of altering its EOQ-based inventory system to account for the uncertainty is to
add safety stock
increase the size of every order
slow production whenever sales trends change
stock only finished goods inventories


17. An automobile manufacturer has just decided to outsource windshields instead of making them itself. Using an outside supplier under the just-in-time approach will have what immediate effect on the manufacturer's inventory management?
reduce finished goods inventories
reduce raw material inventories
reduce work in process inventories
both a and b
both b and c


18. A larger inventory order quantity _____________ ordering costs but _____________ holding costs, assuming both are measured over a specific period of time.
increases, decreases
has no effect on, increases
has not effect on, decreases
decreases, increases


19. A credit policy includes each of the following except:
credit standards
the company's approach to credit investigation and corrections
whether a "just in time" system will be used
credit terms


20. The major motives for trade credit extension include all of the following except:
pricing motive
operating motive
contracting cost motive
production motive

Explanation / Answer

16 increase the size of every order 17 both a and b 18 has no effect on, increases 19 the company's approach to credit investigation and corrections 20 contracting cost motive

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