In the production quantity EOQ model, what would be the effect of the production rate becoming increasingly large as the demand rate became increasingly small, until the ratio d/p was negligible? Qopt will become zeroQopt will become infinitely largeQopt will become almost equal to the Qopt for basic EOQ model Changing the d/p ratio has no effect on Qopt
Question
In the production quantity EOQ model, what would be the effect of the production rate becoming increasingly large as the demand rate became increasingly small, until the ratio d/p was negligible? Qopt will become zeroQopt will become infinitely largeQopt will become almost equal to the Qopt for basic EOQ model Changing the d/p ratio has no effect on Qopt
Solution
The Economic Order Quantity (EOQ) model is used to determine the optimal order quantity that a company should use to minimize its inventory costs. The production quantity EOQ model considers both the demand rate (d) and the production rate (p).
If the production rate becomes increasingly large while the demand rate becomes increasingly small, the ratio d/p becomes negligible. This means that the production rate is much higher than the demand rate.
In this scenario, Qopt (the optimal order quantity) will become almost equal to the Qopt for the basic EOQ model. This is because, in the basic EOQ model, it is assumed that the production rate is infinite (or at least, much larger than the demand rate), which is the same assumption we're making when we say that the d/p ratio is negligible.
So, the correct answer is: Qopt will become almost equal to the Qopt for the basic EOQ model.
Similar Questions
Which of the following scenarios could lead to a decrease in a company's P/E ratio?
effect on price and quantity when demand increases and supply decreases, in short
How can the EPQ model be economically reconciled with just-in-time (JIT) production?a.Reduce annual demand (D).b.The two cannot be reconciledc.Increase annual holding cost per unit (H).d.Decrease ordering cost (S).
A free market is currently experiencing excess supply at a price of P 1.What will be the effect on the current market situation if a maximum price is set above P 1?A The excess supply will increase.B The market will move into an equilibrium position.C There will be no effect.D There will be excess demand
Use the supply and demand equations to following question.Qs = 3PQd = 10 - PA minimum price of $6.00 in the market described by these equations would result inQuestion 7Select one:a.excess demandb.excess supply of 14 unitsc.quantity traded of 18 unitsd.no change in the market as the floor is not binding at equilibrium.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.