True Or False: 1. In transshipment problem, the number of units shipped into a t

Question

True Or False:

1. In transshipment problem, the number of units shipped into a transshipment point should be equal to the number of units shipped out.

2. The linear programming model of the product mix problem only includes constraints of the less than or equal form.

3. The purpose of the Economic Order Quantity (EOQ) model is to achieve a balance between the cost of holding inventory and the cost of stock outs.

4. The two fundamental decisions that you have to make when controlling inventory are: (1) how much to order, and (2) how much money to spend.

5. If in an inventory management problem lead time is 3 days and daily demand is 25 per day then re-order point is 50.

Explanation / Answer

It is not mentioned what to be done with the statements. But it is assumed, TRUE/FALSE is to be marked.

1. According to rules of transhipment, the required amount of goods at the destinations equals the produced quantity available at the origins. Thus, statement is true.

2. The linear programming model of th eproduct mix is based on fundamental principle of optimizing the product mix when the production line works under certain specifications. In case of product mix, the manager can decide about any particular product number in positive or minimum zero. The statement is true.

3. Economic Order quantity balances inventory cost and carrying cost. The statement is true.

4. The fundamental decisions of inventory management includes, 1) how much to order 2) cost of delivery 3) turnaround 4) delivery time. The statement is true.

5. Re-order point=(Average daily usage rate*Lead time)+safety stock=(25*3)+safety stock=75+safety stock. The statement is false.

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