Sensitivity Analysis on the Economic Order Quantity (EOQ) Formula Can

question 117

Multiple Choice

Sensitivity analysis on the economic order quantity (EOQ) formula can help the operations manager answer several questions on how to manage inventories. Which one of the following questions is not answered by EOQ sensitivity analysis?

• A) How critical are errors in estimating demand (D), inventory holding cost (H), and setup cost (S)?
• B) What should happen to lot sizes if interest rates drop?
• C) What should happen to cycle inventory if the demand rate increases?
• D) What should happen to lot sizes if supply and lead-time uncertainty increase?

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Definitions:

Decubitus

An ulcer that occurs on areas of the skin that are under pressure from lying in bed, sitting in a wheelchair, or wearing a cast for a prolonged period; also called pressure ulcers or bedsores.

Arthrocentesis

A medical procedure to collect synovial fluid from a joint capsule using a needle for diagnostic or therapeutic purposes.

Arthroscopy

A minimally invasive surgical procedure on a joint in which examination and sometimes treatment of damage is performed using an arthroscope.

Arthroplasty

Surgical reconstruction or replacement of a joint.