Which of These Statements About the Production Order Quantity Model

question 99

Multiple Choice

Which of these statements about the production order quantity model is false?

• A) The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous.
• B) Because receipt is noninstantaneous, some units are used immediately, not stored in inventory.
• C) Average inventory is less than one-half of the production order quantity.
• D) All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity.
• E) The production order quantity assumes units are produced and sold simultaneously.

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Definitions:

Business Corporations

Legal entities that are formed to engage in business activities, owned by shareholders who share in the profits but are typically not liable for the company's debts.

Time-Value

A concept in economics that money available now is worth more than the same amount in the future due to its potential earning capacity.

Money

Any item that is generally acceptable to sellers in exchange for goods and services.

Present Value

The worth today of a sum of money or cash flow expected in the future, using a specified rate of return for the discounting process.