Mia, a manager at Best Buy, should be able to find Q, the most ...

[panfilo]

Mia, a manager at Best Buy, should be able to find Q, the most economic order size for a product, by ________.
 
  A) locating where the carrying costs curve and the total costs curve intersect
  B) locating where the carrying costs curve and the ordering costs curve intersect
  C) locating where the carrying costs curve and the ordering costs curve are parallel
  D) locating where the total costs curve and the ordering costs curve are parallel

Question 2

A new upgrade for a product is expected to increase demand by a factor of 4. If all other factors remain equal, how is EOQ likely to change?
 
  A) EOQ will double.
  B) EOQ will increase by 50 percent.
  C) EOQ will decrease by 50 percent.
  D) EOQ will not change.

[meganlapinski]

Answer to Question 1

Answer: B
Explanation: Since carrying costs tend to increase as order size goes up and ordering costs decrease, the optimum order size can be found where the curves for each variable intersect.

Answer to Question 2

Answer: A
Explanation: EOQ is computed by finding the square root of the term 2  D  OC/V  CC, where D is demand, OC is the cost of placing each order, V is the purchase price of the item, and CC is the carrying cost. If D goes up by a factor of 4, EOQ will increase by the square root of 4, giving a factor of 2 by which EOQ will increase.