Question

In the (r,Q) policy for managing inventory, if the lead-time increases from 5 to 10 days, the optimal order size, Q, will: a. Double b. Increase by a factor of 4 c. Increase by a factor of square root of 2 d. Increase by a factor that cannot be determined e. Remain the same

Answer 1

d. Increase by a factor that cannot be determined.

Step-by-step explanation:

When the lead-time increases from 5 to 10 days in the (r,Q) inventory policy, the optimal order size, Q, will generally increase. This is because with a longer lead-time, there is a greater risk of stockouts and a need for a larger order quantity to cover the extended time without inventory. However, the specific factor by which the order size will increase cannot be determined without additional information. Factors such as demand variability, holding costs, and ordering costs play a role in determining the optimal order size. Therefore, we cannot determine the exact factor by which Q will increase, and the correct answer is that it cannot be determined.