Indicate whether the following statements are true or false, and for each statement, provide a brief explanation.

management

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Problem 1 – TRUE/FALSE (25 points) Indicate whether the following statements are true or false, and for each statement, provide a brief explanation. 


(a) (5 points) The average flow rate is 10,000 units per day and the average flow time is 4 days. According to Little's Law the maximum inventory will never exceed 40,000 units. 


(b) (5 points) Annual demand for a product is deterministic and constant. The demand rate increases by 20% and setup costs fall by 20%. The EOQ will increase by 20%.


(c) (5 points) A store is using the newsvendor model to order toilet paper assuming that the demand is normally distributed with mean 200, and their optimal order quantity is 150 units. After a few months, the store owner realizes that the demand has a smaller standard deviation than estimated. The owner should order more toilet paper. 

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