In a Fixed Order Quantity (FOQ) System, Which of the Following

question 47

Multiple Choice

In a fixed order quantity (FOQ) system, which of the following is TRUE when interest rates increase and all other costs remain the same?

• A) Cycle inventory decreases
• B) Order quantity increases
• C) Order costs increase
• D) Safety stock quantity increases

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Definitions:

MR

Short for Marginal Revenue, the increase in total revenue a firm receives from selling one additional unit of a good or service.

Economic Profits

The difference between the revenue received from the sale of an output and the opportunity cost of the inputs used.

Fixed Costs

Costs that do not change with the level of output produced by a firm, such as rent and salaries.

Variable Costs

Expenses that change in proportion to the production output or sales volume of a company.