Active Model Exercise

Active Model 9.1, “Economic Order Quantity,” appears in MyLab Operations Management. It allows you to evaluate the sensitivity of the EOQ and associated costs to changes in the demand and cost parameters.

Questions

  1. What is the EOQ and what is the lowest total cost?

  2. What is the annual cost of holding inventory at the EOQ and the annual cost of ordering inventory at the EOQ?

  3. From the graph, what can you conclude about the relationship between the lowest total cost and the costs of ordering and holding inventory?

  4. How much does the total cost increase if the store manager orders twice as many bird feeders as the EOQ? How much does the total cost increase if the store manager orders half as many bird feeders as the EOQ?

  5. What ...

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