Which of the following statements is true with regard to EPQ and EOQ?
A)The economic production quantity (EPQ)model was developed in the 1960s.
B)In the EOQ model,the assumption is that the company will produce the items.
C)The EPQ model assumes that the company will order the items from an outside vendor.
D)The EPQ model is an extension of the EOQ model.

Question

Quizplus · Accepted Answer

The EPQ model is essentially an extension of the EOQ model. While the EOQ model assumes that the company will produce the items internally, the EPQ model takes into account the production setup costs associated with producing each batch of items. Hence, the EPQ model can be used to determine the optimal batch size for both in-house production as well as outsourcing. Option A is incorrect as the EPQ model was developed in the 1920s, not in the 1960s. Option B is also incorrect as the assumption in the EOQ model is that the company will order the items, not produce them. Option C is partly incorrect as the EPQ model can be used to determine the optimal production quantity as well as the optimal order quantity from an outside vendor.

Which of the Following Statements Is True with Regard to EPQ