Asked by ricardo Velazquez on Jun 24, 2024
Verified
Using the EOQ model, a manager can determine _____________. This allows the firm to place orders before inventories reach a critical level, allowing for sufficient delivery time.
A) Carrying costs.
B) Safety stocks.
C) Restocking costs.
D) Reorder points.
E) Theft losses.
EOQ Model
The Economic Order Quantity model is used to determine the optimal order size to minimize the sum of ordering, carrying, and stockout costs.
Reorder Points
The inventory level at which a new order should be placed to replenish stock before it runs out, avoiding stockouts and production delays.
Carrying Costs
The complete expense associated with keeping inventory, encompassing storage fees, insurance, and the cost of missed opportunities.
- Understand the economic order quantity (EOQ) model and its application in reducing inventory expenses.
- Recognize the impact of inventory management decisions on a firm’s operational efficiency and costs.
Verified Answer
LB
Latoya Blackwood-WillisJun 27, 2024
Final Answer :
D
Explanation :
The EOQ (Economic Order Quantity) model helps in determining the reorder point, which is the inventory level at which a new order should be placed to replenish stock before it runs out, ensuring there is enough lead time for delivery and avoiding stockouts.
Learning Objectives
- Understand the economic order quantity (EOQ) model and its application in reducing inventory expenses.
- Recognize the impact of inventory management decisions on a firm’s operational efficiency and costs.