Question

Which one of the following statement is NOT true?

• A.

  A positive forecast error indicates the forecasting method underestimated the actual value.

• B.

  For a single-server waiting line (M/M/1), the utilization factor is the probability that an arriving unit must wait for service.

• C.

  For an M/M/1 system, the average number of customers in the system = the average number in the waiting line + 1.

For the Economic Order Quantity model, the optimal order quantity results in

• A. annual holding cost = annual ordering cost.
• B. annual holding cost = annual setup cost.
• C. annual ordering cost = annual holding cost + annual setup cost.
• D. annual holding cost = annual ordering cost + annual setup cost.

Answer 1

Answer 1: Option C

Explanation: for M/M/1 system, the average number of customers in the system is given by k / (1 - k). Where K = Arrival Rate x Mean Service time

Answer 2: Option A

Explanation: For the Economic order quantity model, the total annual ordering cost is equal to the total annual holding cost. Hence Option A is correct.