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QUESTION

A local company orders a component part at $40/unit. The cost of placing an order is$100, and the annual cost of holding a unit in inventory is 20%....

2. A local company orders a component part at $40/unit. The cost of placing an order is$100, and the annual cost of holding a unit in inventory is 20%. Current annual demand is 10,000 units, demand is treated as known and at a constant rate, and backorders are not allowed.

Check all that apply.

This is a basic EOQ problem.___

The optimal order quantity is greater than 500 units.____

If their current order policy is to order 600 units, the total annual cost would increase.____

If the holding cost were to increase to 25%, the optimal order quantity would increase.____

If they started to produce this component, total cost would decline.____

If annual demand changed to 20,000 units, the optimal order quantity would double.____

If the order cost increased, the optimal number of orders/year would decrease.____

In this model, the service level is 100%.____

3. In #2, suppose you receive a quantity discount such that for orders of at least 600 the cost per unit of the component is $38? Check all that apply. The optimal order quantity (EOQ) for$38 would be the optimal order quantity for the overall problem.____

The optimal order quantity would be the same as in #2.____

The optimal order quantity would be larger than in #2.

The procurement cost is not relevant since it is incurred regardless of order quantity.____