The economic production quantity is 500 units (units are delivered to the user d

Question

The economic production quantity is 500 units (units are delivered to the user department as they come off the production line). If the firm decides to buy this item from an outside supplier rather than producing it, the economic purchase quantity would probably be (assume the inventory costs of production and purchasing and purchasing an item are the same):

a. The direction of change in quantity cannot be determined without additional information.
b. 500 units
c. less than 500 units
d. more than 500 units

Explanation / Answer

Ans: If the firm decides to buy this item from an outside supplier rather than producing it, the economic purchase quantity would probably be more than 500 units.

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