Which of These Statements About the Production Order Quantity Model

question 99

Multiple Choice

Which of these statements about the production order quantity model is false?

• A) The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous.
• B) Because receipt is noninstantaneous, some units are used immediately, not stored in inventory.
• C) Average inventory is less than one-half of the production order quantity.
• D) All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity.
• E) The production order quantity assumes units are produced and sold simultaneously.

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Definitions:

Current Liabilities

Obligations or debts a company expects to settle within one fiscal year or its operating cycle, whichever is longer.

Profit Margin

A financial ratio evaluating a company's profitability, calculated by dividing net income by sales revenue.

Pro Forma

Financial statements or projections based on hypothetical scenarios or assumptions.

Retained Earnings

The cumulative amount of earnings or profit of a firm after dividend payments, which is reinvested in its business.