46

47

48

The information here is the same for answering questions 46 to 50. A company has purchased one component from its supplier for years. Since the production process of this component is quite simple and involves no capital investment, the Operations Manager proposes to make this component in house so that the component may flow gradually into the assembly line for use. The following data are also given for your comparison and decision making: To buy To make Annual demand 30,000 units 30,000 units Cost per unit $9 $10 Fixed cost $45 per order $72 per batch Holding cost (per unit per year) $2.7 $3.0 Weekly demand 600 units 600 units Weekly production N/A 800 units Lead time 5 days N/A Operates 50 weeks a year Suppose the company decides to continue to buy from the supplier. In which of the follow scenarios will EOQ decrease? The inventory holding cost increases from $2.7 to $3.0 The annual demand increases from 30,000 units to 60,000 units The fixed cost increases from $45 to $72 The cost per unit increases from $9 to $10 If the company decides to continue to buy from the supplier, which of the following is not true? If the fixed cost increases by a factor of 4, EOQ will increase by a factor of 2 If the annual demand and the inventory holding cost increase by a factor of 2, EOQ remains the same If the annual demand and the inventory holding cost increases by a factor of 2, the total annual cost remains the same If the fixed cost increases by a factor of 4, the total annual cost will increase by a factor of 2 Suppose the company decides to continue to buy from the supplier. If the lead time increases from 5 days to 10 days, the economic order quantity will Remain the same Decrease by a factor of 2 Increase by a factor of 4 Increase by a factor of v2 Increase by a factor of 2