Questions
SP25: BUS5-140 Sec 11 - Fund of Oper Mgmt Quiz 2
Single choice
In the basic EOQ model, if the cost of placing an order doubles, and all other values remain the same, the EOQ will:
Options
A.Increase by about 41%
B.Increase by 100%
C.Increase by 200%
D.Increase, but exact percentage is unknown.
E.Either increase or decrease.
View Explanation
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Step-by-Step Analysis
The EOQ formula is Q* = sqrt( (2 D S) / H ), where S is the cost per order. If S doubles while all else remains the same, Q* becomes sqrt( (2 D (2S)) / H ) = sqrt(2) * sqrt( (2 D S) / H ). This means the new order quanti......Login to view full explanationLog in for full answers
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Vilas County Hospital consumed 400 boxes of bandages per week last year. The price of bandages was $80 per box, and the hospital operates 52 weeks per year. The cost of processing an order was $64, and the cost of holding one box throughout a full year was 20% of the value of the material. Last year the hospital ordered bandages, on average, once every two weeks, each time ordering 800 boxes. What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied?
EOQ should be used if you use a make-to-order strategy and the customer specifies that the entire order be delivered in one shipment.
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