Scenario 9.7 You Are the Operations Manager of a Firm That Uses

question 60

Multiple Choice

Scenario 9.7
You are the operations manager of a firm that uses the continuous-review inventory control system.Suppose the firm operates 52 weeks a year,365 days,and has the following characteristics for its primary item:
Demand = 25,000 units/year
Ordering cost = $30/order
Holding cost = $8/unit/year
Lead time = 2 weeks
Standard deviation in weekly demand = 100 units
A normal distribution table is appended to this exam.
-Use the information in Scenario 9.7.If this firm uses an EOQ model for purchase decisions,which change would result in the biggest increase in order quantity over the order quantity determined with the original data?

• A)The cost of ordering rises to $50 per order.
• B)The holding cost drops to $5 per unit per year.
• C)The annual demand soars to 30,000 units per year.
• D)The lead-time increases to three months.

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Definitions:

Model Equation

A mathematical representation that shows the relationships between different variables.

Revenue

The total amount of money received by a company for goods sold or services provided during a certain period.

Factoring

The process of breaking down an expression into a product of its simpler factors.