ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Under economic-order-quantity decision model, it is assumed that ____
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the quantity ordered can vary at each reorder point
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demand, ordering costs, and carrying costs are uncertain
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the purchasing cost per unit is affected by the order quantity
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no inventory stockouts occur
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Explanation:
Detailed explanation-1: -The economic-order-quantity decision model takes into account occurrence of stockouts. As the inventory turnover ratio increases, the inventory conversion cycle increases. In EOQ model, the average inventory is defined as the order quantity divided by 2.
Detailed explanation-2: -Economic order quantity (EOQ) is a calculation companies perform that represents their ideal order size, allowing them to meet demand without overspending. Inventory managers calculate EOQ to minimize holding costs and excess inventory.
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