Question

In MRP, EOQ models tend to be less useful for materials at the lowest levels than for upper level assemblies of the bill of materials since higher-level assemblies have larger dollar investments

A) Agreed
B) Disagreed
C) Contested
D) Overruled

Answer 1

EOQ models are less useful for lower-level materials in MRP due to smaller dollar investments and higher order frequency, making them more beneficial for higher-level assemblies that require larger dollar investments.

Step-by-step explanation:

In Material Requirements Planning (MRP), Economic Order Quantity (EOQ) models are typically considered to be less useful for materials at the bottom levels of the Bill of Materials (BOM), which represent the raw materials or basic components needed to build a product. EOQ is less applicable here because these lower-level components usually involve smaller dollar investments and higher frequency of orders, making the cost efficiencies of EOQ less prominent.

However, for upper-level assemblies that require larger dollar investments and have more significant impact on the business's working capital, EOQ models can be more beneficial as they help to optimize ordering quantities and minimize holding and ordering costs.

Considering this context, the statement that 'EOQ models tend to be less useful for materials at the lowest levels than for upper-level assemblies of the bill of materials since higher-level assemblies have larger dollar investments' can be agreed with, which corresponds to option A) Agreed.