mktg 372 test 3 practice

If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost?

$1,200

R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. If R. C. orders 500 units each time he places an order, what would the total annual holding cost be?

$1,200

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model is 200 units, and the total annual inventory (carrying and setup) cost is $600. What is the inventory carrying cost per unit per year for this item?

$3.00

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the total annual inventory cost for napkins is

$5,000.

A demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item? Quantity Unit Price 1 - 1,499 1500 - 4,999 5,000 or more $2.50 $2.30 $2.25

1,500

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity each time an order is placed, then ______orders are placed during the year. is

13

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the average inventory for napkins is

2,500 boxes.

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate over the 365 days that it is open. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the time between orders (order cycle) is

29.2 days

If a company carries 13 weeks of supply, what is the inventory turnover?

4

The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. Currently, the company is ordering 500 units each time an order is placed. What should be the reorder point (excluding any safety stock) under the current policy?

48

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. If the cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00, then the economic order quantity for napkins is

5,000 boxes.

Suppose that a plant manager uses economic batch sizes for production of a product. Suppose further that the setup cost is $50 per batch, the holding cost per unit per year is $10, the annual demand is 30,000 units, the firm operates (and experiences demand) 300 days per year, and the production rate per day is 1000 units. What will be the maximum inventory level that this product ever reaches?

519

Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The holding cost is $2 per unit per year. The cost of setting up the production line for this is $25. There are 200 working days per year. The production rate for this product is 80 per day. If the production order quantity is 200 units, what was the daily demand (rounded to the nearest whole unit)?

7

For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15,000 units. The following price schedule applies to the firm's purchases. Units Ordered Price Per Unit 1-250 $30.00 251-500 $28.00 501-750 $26.00 ≥ 751 $25.00

812

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units. However, due to recent events he has a cash flow problem. Therefore, he orders only 100 units each time he places an order. Which of the following is true for this situation

Annual ordering cost will be higher than annual holding cost.

If the costs (S and H) and demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model?

Both models use the same formula to compute annual holding cost. The inventory depletion rate is the same for both models.

How can the EPQ model be economically reconciled with just-in-time (JIT) production?

Decrease ordering cost (S).

In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks?

EOQ / average weekly demand

What implies that about 20% of the inventory items will account for about 80% of the inventory value?

Pareto's law

The ranking in ABC inventory analysis is based on what?

annual dollar usage

What costs are considered in the basic EOQ model?

annual ordering costs + annual holding costs

What costs are considered in the quantity discount model?

annual purchasing costs + annual holding costs + annual ordering costs

What are two logical ways in which to base the time between orders in a periodic review system?

convenience or EOQ calculations

ABC inventory assumes that a company's inventory is ____ equal and _______________ the same level of _________.

not, does not need, control

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

one-third as large

For the basic EOQ model, how many units should be ordered each time that an order is placed?

square root 2DS H

If the EOQ is ordered, which of the following represents the total annual cost of ordering and holding?

square root 2DSH

What are the two major decisions to be made when using the periodic review system?

the time between orders and the target inventory level