Sensitivity analysis on the economic order quantity (EOQ)formula can help the operations manager answer several questions on how to manage inventories.Which one of the following questions is NOT answered by EOQ sensitivity analysis?
A)How critical are errors in estimating demand (D),inventory holding cost (H),and setup cost (S)?
B)What should happen to lot sizes if interest rates drop?
C)What should happen to cycle inventory if the demand rate increases?
D)What should happen to lot sizes if supply and lead-time uncertainty increase?

Question

Quizplus · Accepted Answer

EOQ sensitivity analysis does not directly address changes in lot sizes due to supply and lead-time uncertainty, as EOQ primarily focuses on balancing ordering and holding costs based on demand, holding cost, and setup cost.

Sensitivity Analysis on the Economic Order Quantity (EOQ)formula Can Help