A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the economic production quantity would be approximately
A)the same.
B)20 percent larger.
C)40 percent larger.
D)20 percent smaller.
E)40 percent smaller.

Question

Quizplus · Accepted Answer

The economic production quantity (EPQ) is larger than the EOQ when the production rate is greater than the usage rate. Specifically, when the production rate is about double the usage rate, the EPQ is approximately 40% larger than the EOQ.

A Manufacturer Is Contemplating a Switch from Buying to Producing