Sensitivity Analysis of EOQ Refers to

question 38

Multiple Choice

Sensitivity analysis of EOQ refers to

• A)the attitude of top management toward the use of the EOQ model.
• B)analysis of how much the EOQ will change if different input values are used.
• C)an assessment of the impact of obsolescence upon the EOQ.
• D)a study of the impact of storing incompatible products in the same warehouse.
• E)analysis of the impact of stock shortages on customers or on production.

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Definitions:

Inventory Cost

Inventory cost includes all expenses associated with acquiring, holding, and processing goods that are to be sold, including the costs of materials, labor, and overhead.

Customer Demand

The desire and willingness of consumers to purchase goods and services at given prices.

Inventory Turnover

A ratio that measures how often a company sells and replaces its stock of goods within a certain period, indicating efficiency in inventory management.

Average Inventory

The average value of a company's inventory over a specific period, calculated by adding the beginning and ending inventory and dividing by two.