QUESTION 8 Consider an optional replenishment system (also called a min-max or (

Question

QUESTION 8 Consider an optional replenishment system (also called a min-max or (s,S) system) for inventory control. This type of system was simulated in the lab, and is described in the textbook. For each of the following statements, indicate whether it will be TRUE or FALSE of such a system. (Simply type one of True' or 'False' beside each statement). a) Annual ordering costs will decrease if the difference between s (min) and S (max) is decreased b) Changes to s (min) has a more profound effect on stockouts than changes to S (Max). c) The order quantity will be the same with every order, and will be equal to S-s (which could be expressed as Max-Min). d) Changes to either s (min) or S (Max) will effect total holding costs. QUESTION 9 Consider the case where a business orders from a supplier using a continuous review (Q) system, and in quantitics that are consistent with the Economic Order Quantity (EOQ) How should the following change to a cost parameter or a condition affect their order quantity (assuming that they adjust their order quantities accordingly)? If the supplier is able to fill orders for the business quicker (i.e., shorter lead time), then the order quantity should a. increase Ob. decrease Oc. Cnot be changed (stay the same)

Explanation / Answer

ANSWER TO QUESTION 9 :

With a shorter Lead time , Reorder point will REDUCE , since Reorder point = Average demand / unit time x Lead time ( in same unit of time ) + Safety stock

The formula for Economic Order Quantity ( EOQ ) = Square root ( 2 x Ordering cost x Annual demand / Annual unit holding cost )

Therefore , it can be seen that LEAD TIME has no bearing on determination of EOQ

Therefore, EOQ will not change with reduction in lead time

ANSWER : C ) NOT BE CHANGED ( STAY THE SAME )

ANSWER : C ) NOT BE CHANGED ( STAY THE SAME )

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.