According to the assumptions upon which the EOQ model is based, total inventory costs _______________ with increases in the number of units ordered in each order.

Answer

First increases, then decreases

first decreases, then increases

increases, but at a slowing rate

decreases, but at a slowing rate

Borque Manufacturing forecasts that its production will require 500,000 tons of bauxite over its planning period. Demand for Torque's products is stable over time. Ordering costs amount to an average of $20.00 per order. Holding costs are estimated at $1.25per ton of bauxite. EOQ for Torque is

Answer

2,200 tons

6,000,000 tons

4,000 tons

5.6tons

Restrictive assumptions used to develop and use the basic EOQ model include all of the following except:

Answer

a non-constant order cost per order

a constant cost of holding each unit of inventory

a very accurate inventory demand forecast

a constant rate of inventory usage

A company may wish to add a safety stock if it faces uncertain demand. The inventory analyst should modify the following in light of the safety stock:

Answer

recompute the average inventory by adding the safety stock amount to the present average inventory balance

recompute the reorder point by adding the safety stock to the present reorder point

recompute EOQ by adding the safety stock to period demand to arrive at a new usage rate

both a and b

both b and c