If the Costs (S and H) and Demands (D) Are

question 99

Multiple Choice

If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model?

• A) The EPQ model produces a higher total annual cost.
• B) The maximum inventory level is lower under the EPQ model than under the EOQ model.
• C) Both models use the same formula to compute annual ordering cost.
• D) The inventory depletion rate is the same for both models.
• E) The two models use different formulas to compute annual holding cost.

---

Definitions:

Inventory Service Costs

Expenses associated with storing, handling, and managing inventory, including warehousing and insurance costs.

Independent Demand Items

Products or services for which demand is influenced by market conditions and customer preferences, not related to the production plans for other items.

Production Schedule

A detailed plan outlining the timing and sequence of production activities necessary to complete a manufacturing process.

MRP II

Stands for Manufacturing Resource Planning, an integrated method of operational and financial planning for manufacturing companies, improving overall production efficiency.