What does the Economic Order Quantity (EOQ) model help to determine?

• The optimal order size that minimizes total inventory cost

• The maximum level of inventory to hold

• The minimum level of inventory to hold

• The reorder point for inventory

In the context of inventory management, what does the term 'safety stock' refer to?

• The amount of inventory kept to protect against stockout

• The total amount of inventory in the warehouse

• The inventory that is obsolete and needs to be written off

• The inventory that is in transit

What is the purpose of a reorder point in inventory management?

• To determine the quantity of inventory to be ordered

• To identify the safety stock level

• To specify when a new order should be placed to replenish inventory

• To classify inventory items based on their value

In the context of inventory management, what does 'lead time' refer to?

• The time taken to manufacture a product

• The time between placing an order and receiving it

• The time taken to count inventory

• The time taken to classify inventory items

Which inventory cost includes expenses such as warehousing, insurance, and obsolescence?

• Ordering Cost

• Carrying Cost

• Stockout Cost

• Setup Cost

The EOQ model primarily aims to balance which two types of costs?

• Transportation costs and warehousing cost

• Ordering costs and carrying cost

• Labor costs and production cost

• Stockout costs and setup cost

How does the EOQ model handle variations in demand?

• It ignores variations and assumes constant demand

• It adjusts order quantities based on historical data

• It incorporates safety stock to handle variations

• It uses a complex algorithm to predict future demand

In inventory management, what is a 'stockout'?

• The condition where excess inventory is held

• The condition where inventory is replenished

• The condition where inventory is depleted and unable to meet demand

• The condition where inventory is written off due to obsolescence

What is the primary objective of the quantity discount model in inventory management?

• To reduce the number of suppliers

• To minimize total inventory costs by considering discounts for larger order quantities

• To classify inventory items based on their value

• To implement a perpetual inventory system

If a company uses the quantity discount model and finds that the EOQ is higher than the minimum quantity required for a discount, what should they do?

• Ignore the discount and order the EOQ

• Recalculate the EOQ considering the discount

• Order the minimum quantity required for the discount if it results in a lower total cost

• Always order the maximum quantity offered by the supplier