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) What should happen to lot sizes if supply and lead- time uncertainty increase?
B) How critical are errors in estimating demand (D), inventory holding cost (H), and setup cost (S)?
C) What should happen to cycle inventory if the demand rate increases?
D) What should happen to lot sizes if interest rates drop?

Question

Quizplus · Accepted Answer

Sensitivity analysis of EOQ 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.

Sensitivity Analysis on the Economic Order Quantity (EOQ) Formula Can