Which of the following statements regarding the production order quantity model is TRUE?
A) It applies only to items produced in the firm's own production departments.
B) It relaxes the assumption that all the order quantity is received at one time.
C) It relaxes the assumption that the demand rate is constant.
D) It minimizes the total production costs.
E) It minimizes inventory.

Question

Quizplus · Accepted Answer

The production order quantity model allows for multiple deliveries of the order quantity, relaxing the assumption that all the items are received at one time. Option A is incorrect because the production order quantity model applies to both internally produced items and externally sourced items. Option C is incorrect because the model assumes constant demand rate. Option D is incorrect because the model aims to minimize setup costs and inventory holding costs, not total production costs. Option E is also incorrect as the model aims to balance inventory level with setup costs, not just minimize inventory.

Which of the Following Statements Regarding the Production Order Quantity