We know that, theoretically, ordering the EOQ drives lower costs. However, what

Question

We know that, theoretically, ordering the EOQ drives lower costs. However, what happens when we introduce modifications to the assumptions of the EOQ model? Think about the following situations and select all the statements that are true. SELECT ALL APPLIED

A) If planned backorders are allowed, the order size will increase.

B) A one-time-buy discount will always increase the order size.

C) A decrease of the transaction cost will increase the order size.

D) If a lead time is introduced in the EOQ model, the order size will increase.

E) When a supplier offers an all-units discount, his buyers’ cycle stock tends to raise because they increase the size of each order.

None of the above

Explanation / Answer

C) A decrease of the transaction cost will increase the order size.

If the carrying cost or the item cost decreases the the order size will increase because if we look at the formula we will observe that both carrying cost and item cost around at the denominator.

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