A characteristic of the basic economic order quantity EOQ) model is that it
Answer(s): A
The basic EOQ model equals the square root of the quotient of 1) the product of twice the demand times the cost per order, ) divided by the periodic carrying cost. Hence, the model is relatively insensitive to error. A given percentage error in a value results in a lower percentage change in the EOQ.
Companies that adapt just-in-time purchasing systems often experience
Answer(s): B
The objective of JIT is to reduce carrying costs by eliminating inventories and increasing the deliveries made by suppliers. Ideally, shipments of raw materials are received just in time to be incorporated into the manufacturing process. The focus of quality control under JIT is the prevention of quality problems. Quality' control is shifted to the supplier. JIT companies typically do not inspect incoming goods; the assumption is that receipts are of perfect quality. Suppliers are limited to those who guarantee perfect quality and prompt delivery.
A manufacturing company is attempting to implement a just-in-time JIT) purchase policy system by negotiating with its primary suppliers to accept long-term purchase orders which result in more frequent deliveries of smaller quantities of raw materials. If the JIT purchase policy is successful in reducing the total inventory costs of the manufacturing company, which of the following combinations of cost changes would be most likely to occur?
Answer(s): D
The objective of a JIT system is to reduce carrying costs by eliminating inventories and increasing the deliveries made by suppliers. Ideally, shipments are received just in time to be incorporated into the manufacturing process. This system increases the risk of stockout costs because the inventory buffer is reduced or eliminated. The diagram presented represents the economic circler quantity ECQ) model.
Which line segment represents the reorder lead time?
The quantity of inventory on hand is represented by they axis and time by the axis. The reorder lead time is represented by the line segment BC. The diagram presented represents the economic circler quantity ECQ) model.
Which line segment identifies the quantity of safety stock maintained?
Quantities of inventory are shown along they axis. Safety stock is represented by the line AE. The diagram presented represents the economic circler quantity ECQ) model.
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