The following relate to the management of raw materials:(i) Holding costs per unit of inventory would increase(ii) The economic order quantity would decrease(iii) Average inventory levels would increase(iv) Total ordering costs would decreaseWhich of the above would result from the introduction of buffer (safety) inventory?
A、(iii) only
B、(ii) and (iii) only
C、(ii), (iii) and (iv) only
D、(i), (ii), (iii) and (iv)
A、(iii) only
B、(ii) and (iii) only
C、(ii), (iii) and (iv) only
D、(i), (ii), (iii) and (iv)
【参考答案及解析】
The introduction of buffer inventory would increase average stockholding. So (iii) is correct. Total holding cost would increase but holding costs per unit should stay the same or may even decrease so (i) is incorrect. The Economic Order Quantity is dependent on the cost of ordering per order, annual demand and unit holding costs, none of which should change so EOQ should not be affected. Total ordering cost should not be affected.
The introduction of buffer inventory would increase average stockholding. So (iii) is correct. Total holding cost would increase but holding costs per unit should stay the same or may even decrease so (i) is incorrect. The Economic Order Quantity is dependent on the cost of ordering per order, annual demand and unit holding costs, none of which should change so EOQ should not be affected. Total ordering cost should not be affected.