The Primary Purpose of the Basic Economic Order Quantity Model

question 96

Multiple Choice

The primary purpose of the basic economic order quantity model shown below is Q∗ =

• A)to calculate the reorder point,so that replenishments take place at the proper time.
• B)to minimize the sum of carrying cost and holding cost.
• C)to maximize the customer service level.
• D)to minimize the sum of setup cost and holding cost.
• E)to calculate the optimum safety stock.

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Definitions:

Misery Index

An economic indicator created by adding the unemployment rate to the inflation rate, meant to represent the average citizen's economic well-being.

Unemployment Rate

The segment of the labor force that is currently jobless and engaging in job-seeking activities.

Deflation

A decrease in the general price level of goods and services, often indicating a contraction in the amount of money and credit in the economy.

Average Price Level

A general measure of price changes across the economy, indicating the cost of purchasing a typical basket of goods and services.