Question 1

As the order quantity increases, the average inventory and the annual cost of carrying inventory decrease.

Accepted Answer

As the order quantity increases, the average inventory and the annual cost of carrying inventory typically increase, not decrease, due to holding more stock.

Question 2

For a family of items, the ordering costs and the carrying costs are generally the same for each item.

Accepted Answer

Ordering and carrying costs are typically the same for each item in a family of items because they are based on the same factors, such as the cost of placing an order and the cost of holding inventory.

Question 3

One problem in using the EOQ formula is in determining the cost of ordering and the cost of carrying inventory.

Accepted Answer

Determining the exact costs of ordering and carrying inventory can be challenging due to variability in expenses and the need for accurate data, which can complicate the use of the EOQ formula.

Question 4

Parts are often ordered in convenient packages such as pallet loads, cases, or dozens, and it is adequate to pick the package quantity closest to the EOQ.

Accepted Answer

It is often more efficient to order parts in convenient packages, even if the package quantity is not exactly equal to the EOQ. This is because it can save time and money on packaging and shipping.

Question 5

There is no reason to calculate the EOQ for made- to- order items in which the customer specifies the order quantity,t he shelf life of the product is short, or the length of the run is limited by tool life or raw material batch size.

Accepted Answer

EOQ (Economic Order Quantity) is used to minimize the total cost of inventory, but for made-to-order items where the order quantity is predetermined by the customer or constrained by other factors, calculating EOQ is unnecessary.

Question 6

Some suppliers require a minimum order.

Accepted Answer

Some suppliers have policies that require customers to purchase a minimum quantity of goods to ensure cost-effectiveness and manage inventory efficiently.

Quiz 10: Order Quantities