Imagine Comparing a Manufacturing Operation Using Regular Lot-Sizing and the Same

question 44

Multiple Choice

Imagine comparing a manufacturing operation using regular lot-sizing and the same operation with a Kanban/lean production approach.What would be your expectations of the difference between the total cost (i.e., inventory holding costs + setup/ordering costs) of each?

• A)Inventory holding cost will increase non-linearly with inventory
• B)Total costs will be lower for the regular lot-size operation
• C)Total costs will be lower for the Kanban/lean production operation
• D)The order quantity will be larger for the Kanban/lean production approach
• E)As long as the total quantity is the same, total costs will be the same

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Definitions:

Risk Neutral

A description of an individual or entity that does not show a preference for risk, valuing all investments purely by their expected return without concern for their risk.

Risk Averse

A description of an individual or entity that prefers outcomes with lower uncertainty and is less likely to engage in actions with uncertain outcomes.

Income

The money or earnings received by an individual or organization, often from employment, business, investments, or other sources.

Utility Function

A mathematical representation of how a set of goods and services (or choices) are ranked according to their usefulness to a person.