Scenario 9.6 Consider the Following Data for an Independent-Demand Item Maintained by Maintained

question 185

Multiple Choice

Scenario 9.6
Consider the following data for an independent-demand item maintained by Angie Bonpensiero, the proprietor of a local auto repair shop:
Weekly demand = 50 units
Ordering cost = $8/order
Holding cost = $4/unit/year
Weeks in a year = 50
-Use the information in Scenario 9.6. Due to new ordering procedures initiated by Bonpensiero, the ordering cost is drops to $4 per order. At the same time, the weekly demand increases to 64 units per week due to an increase in business. What effect do these changes have on the EOQ quantity for this item?

• A) The EOQ quantity remains unchanged.
• B) The EOQ quantity increases by 20%.
• C) The EOQ quantity decreases by 20%.
• D) Sufficient information is not available to answering this question.

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Definitions:

Employee Retirement Income Security Act

A federal law that sets standards for pension and health plans to provide protection for individuals in these plans.

Federal Racketeering Law

Laws aimed at combating organized crime that allow for the prosecution of individuals involved in ongoing criminal organizations, most notably under the Racketeer Influenced and Corrupt Organizations Act (RICO).

Contributory Plan

A type of insurance plan or pension scheme where both the employer and the employee contribute towards the cost of the benefits.

Salary

Fixed regular payment, typically expressed on an annual basis, made by an employer to an employee, especially a professional.