Which of the following is not an advantageous reason to reduce inventories?

1. Which of the following is not an advantageous reason to reduce inventories?

a. Inventories provide a competitive advantage.

b. Inventories can invite overproduction.

c. Inventories are expensive to maintain.

d. Inventories may conceal problems.

e. All of these are good reasons to reduce inventories.

2. The fundamental EOQ model

a. provides for fluctuating lead times during reorder cycles.

b. is relatively insensitive to errors in demand, procurement costs, and carrying costs.

c. focuses on the trade-off between production costs and carrying costs.

d. is stochastic in nature.

e. is best used in conjunction with a periodic inventory system.

3. Refer to the equation for the EOQ in the text. Car Country, a local Ford dealer, sells 1,280 small SUVs each year. Keeping a car on the lot costs Car Country $200 per month, so the company prefers to order as few SUVs as is economically feasible. However, each time an order is placed, the company incurs total costs of $300. Of this $300, $240 is fixed and $60 is variable. Determine the company’s economic order quantity.

a. 8

b. 16

c. 18

d. 56

e. 62