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AS2021 Decision Analysis (PRD2 A 2024/25)

AS2021 Decision Analysis (PRD2 A 2024/25)

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Safety or buffer stock

depends on the order costs.

depends on the variability of demand during lead time.

can be determined by the EOQ formula.

is not needed to determine the actual order quantity.

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The critical problem underlying the management of inventory is to determine:

appropriate level of inventory.

maximum level of demand.

minimum level of demand.

lead time.

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Consider the Simple Inventory Control model with a constant demand and a fixed lead time which is shorter than the cycle time. Which statement is valid?

The reorder level is equal to the lead-time demand.

100%

The reorder level is lower than the lead-time demand.

The reorder level is unrelated to the lead-time demand.

The reorder level is higher than the lead-time demand.

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Any price break point for quantity discount might be the most economic.

The EOQ model is quite sensitive to changes in costs.

In the EOQ model, the average inventory per cycle, and over many cycles, is Q/2.

A company buys calculators at a price of $3.5 per unit. The holding cost of each calculator is $0.73 per calculator p.a. The annual demand for the calculator is 20900. The cost of ordering is $39 per order.

What is the EOQ? (in whole numbers)

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The time between placing orders is the lead time.

True

False

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Annual purchase cost needs to be included in the total cost calculation for

the quantity discount extension of the EOQ model

100%

all inventory models

the EOQ model without lead-time

the EOQ model with lead-time