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

question 9

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 lower total annual cost.
• B) The maximum inventory level is lower under the EPQ model than under the EOQ model.
• C) The two models use different formulas 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:

Annually Compounded

An investment or interest calculation method where the interest earned over the year is added to the principal at year-end, affecting the amount earned the following year.

Nominal Rate

The nominal rate refers to the interest rate stated on a loan or investment agreement before adjusting for inflation or other factors.

Annually Compounded

The process of calculating interest on both the initial principal and the accumulated interest from previous periods, once per year.

Nominal Interest Rate

The interest rate before adjustments for inflation or other factors that affect the real value of money.