Asked by Natalee Hines on Jul 01, 2024
Verified
The addition of a safety stock to the EOQ model does not change the total inventory costs.
Safety Stock
An inventory buffer to prevent stockouts, typically held to account for variability in demand or supply.
EOQ Model
Economic Order Quantity Model; an inventory management formula that determines the optimal order quantity to minimize total inventory costs.
- Assess the impact of inventory management decisions on total inventory costs and how safety stocks influence these costs.
Verified Answer
DT
Daniel TorresJul 06, 2024
Final Answer :
False
Explanation :
The addition of a safety stock to the EOQ model does increase total inventory costs. This is because the safety stock is added to prevent stockouts, which means more inventory needs to be held on average, leading to higher carrying costs.
Learning Objectives
- Assess the impact of inventory management decisions on total inventory costs and how safety stocks influence these costs.
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