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Question 285 - CSCP discussion

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A key assumption of the economic order quantity (EOQ) is that:

A.
future demand cannot be projected.
Answers
A.
future demand cannot be projected.
B.
the rate of demand is continuous and constant.
Answers
B.
the rate of demand is continuous and constant.
C.
reorder frequency is fixed.
Answers
C.
reorder frequency is fixed.
D.
as the lot size decreases, the setup cost per unit decreases.
Answers
D.
as the lot size decreases, the setup cost per unit decreases.
Suggested answer: B

Explanation:

The Economic Order Quantity (EOQ) model is designed to determine the optimal order quantity that minimizes the total costs of inventory, including ordering and holding costs. A key assumption of the EOQ model is that the rate of demand is continuous and constant. This means that the demand for the product does not fluctuate significantly over time, allowing for a steady and predictable rate of consumption. This assumption simplifies the calculation by ensuring that order cycles are regular and inventory depletion occurs at a consistent rate. Options A, C, and D do not align with the fundamental assumptions of the EOQ model.

Chopra, S., & Meindl, P. (2015). Supply Chain Management: Strategy, Planning, and Operation.

https://www.investopedia.com

asked 16/09/2024
Miguel Seron Blasco
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