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Exam Code AD5-E802
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Questions 160

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NEW QUESTION: 1
The economic order quantity is the size of the order that minimizes total inventory costs which include ordering and holding carrying) costs. It can be calculated using the formula

If Q = order size in units, D = annual demand in units, p = cost per purchase order, s = carrying cost per year for one unit of inventory. If the annual demand decreases by 369/o the optimal order size will:
A. Increase by 6%. Decrease by 6%.
B. Decrease by 20%.
C. Increase by 20%.
Answer: B
Explanation:
D decreases by 36%, that is, from 100% to 64%. Because .64 is the square of .8, the EOQ for 64D Q~) equals 80% of the EOQ for D (Q).



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