Multiple choice questions:
Question 1
If annual demand is 12,000 units, the ordering cost is $6 per order, and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model (EOQ)?
A. 576
B. 240
C. 120.4
D. 60.56
E. 56.03
Question 2
If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is
$5 per unit per year, which of the following is the optimal order quantity using the fixed-order
quantity model (EOQ)?
A. 909
B. 707
C. 634
D. 500
E. 141
Question 3
Using the fixed-order-quantity model (EOQ), which of the following is the annual ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80, and a holding cost per unit per year of $4?
A. $849
B. $1,200
C. $1,889
D. $2,267
E. $2,400
Question 4
Using the fixed-order-quantity model, which of the following is the total cost function given an annual demand of 36,000 units, a cost per order of $80, and a holding cost per unit per year of $4?
A. $2Q
B. $2,880,000/Q
C. $2Q+$2,880,000/Q
D. $2,880,000Q+$2/Q
Question 5
What is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days?
A. 421
B. 234
C. 78
D. 26
E. 31
Question 6
A company is planning for its financing needs and uses the basic fixed-order-quantity inventory model (EOQ). Which of the following is the total cost (TC), including purchasing cost, of the inventory given an annual demand of 10,000, ordering cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150?
A. $1,501,600
B. $1,498,200
C. $500,687
D. $499,313
E. None of the Above
Question 7
A company is planning for its financing needs and uses the basic fixed-order-quantity inventory model. Which of the following is the average inventory given an annual demand of 10,000, ordering cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150?
A. 400
B. 200
C. 5,000
D. 1,400
Question 8
A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. How much cash should the credit union keep at the ATM, that is, what is the Economic Order Quantity (Optimal Q, Q*)?
A. $416,000
B. $28,844
C. $800
D. $14,422
Question 9
A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. What is the average inventory in the ATM?
A. $416,000
B. $28,844
C. $800
D. $14,422
Question 10
A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. What is the throughput through the ATM annually?
A. $416,000
B. $28,844
C. $800
D. $14,422
Question 11
A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. What is the Inventory turnover for this ATM machine?
A. 200 turns
B. 14.4 turns
C. 28.8 turns
D. 52 turns
Question 12
A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. How often should the credit union replenish the ATM, that is, what is the elapsed time between each refill?
A. 3.6 weeks
B. 1.8 weeks
C. 1.0 week
D. 2.0 weeks
Question 13
A university credit union that serves a very large student population has an ATM in the student union where several cafes, restaurants, game rooms, gift shops and other unique shops are located. The average cash withdrawal at the ATM is about $40. Average number of cash withdrawals per week is about 200. The credit union estimates that the fixed cost of filling the ATM is about $100 regardless of the amount of cash in. Annual cost of money is 10% per year. Assume 52 weeks in a year. If the credit union expects the demand for cash to triple next year, how much should the credit union keep at the ATM, that is, what is the new optimal quantity (inventory level, Q)?
A. $86,532
B. $37,497
C. $49,959
D. $416,000
Question 14
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. Given that each outlet orders independently and gets its own delivery, determine the optimal order size at each outlet; that is, EOQ (Q*)
A. 4,000 units
B. 1,500 units
C. 8,485 units
D. 3,000 units
Question 15
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. What is the average inventory for each outlet?
A. 4,000 units
B. 1,500 units
C. 8,485 units
D. 3,000 units
Question 16
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. How many orders each outlet must place annually?
A. 50 orders
B. 67 orders
C. 3,000 orders
D. 1,500 orders
Question 17
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. What is the total cost of inventory for each outlet (material cost not included)?
A. $360,000
B. $120,000
C. $180,000,000
D. $339,411
Question 18
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. If the purchasing centralizes purchasing (for all four outlets), the retailer will only have to place a single order for all the outlets. The supplier will deliver the order on a common truck to a transit point and individual outlet requirements are identical. The total order is split equally and shipped to the retailers from this transit point. The entire operation has increased the fixed cost of placing an order to $1,800. What is the EOQ under centralization?
A. 4,000 units
B. 1,500 units
C. 8,485 units
D. 3,000 units
Question 19
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. If the purchasing centralizes purchasing (for all four outlets), the retailer will only have to place a single order for all the outlets. The supplier will deliver the order on a common truck to a transit point and individual outlet requirements are identical. The total order is split equally and shipped to the retailers from this transit point. The entire operation has increased the fixed cost of placing an order to $1,800. What is the total cost under centralization (material cost not included)?
A. $360,000
B. $120,000
C. $180,000,000
D. $339,411
Question 20
A computer equipment retailer has four retail locations. Currently each outlet manages its ordering independently. Demand at each retail outlet averages 4,000 units per week. Each unit costs $200; the holding cost is 20% per annum. The fixed cost of each order (administrative plus transportation) is $900. Assume 50 weeks in a year. If the purchasing centralizes purchasing (for all four outlets), the retailer will only have to place a single order for all the outlets. The supplier will deliver the order on a common truck to a transit point and individual outlet requirements are identical. The total order is split equally and shipped to the retailers from this transit point. The entire operation has increased the fixed cost of placing an order to $1,800. If the inventory cost under decentralization (each outlet orders individually) is $120,000, how much is the company saving as the result of centralization?
A. $339,411
B. $120,000
C. $480,000
D. $140,589
Question 21
A mail order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. What is the economic order quantity for this company?
A. 2,400 boxes
B. 1,000 boxes
C. 5,000 boxes
D. 10,000 boxes
Question 22
A mail order house uses 18,000 boxes a year. Carrying costs are 60 cents per box a year, and ordering costs are $96. The table below shows the quantity discount ranges available to the company. If the company takes advantage of quantity discount, what would be the quantity order and the minimum total cost?
Number of boxes Price per box
1,000 to 1,999 $ 1.25
2,000 to 4,999 1.20
5,000 to 9,999 1.15
10,000 or more 1.10
A. 1,000 boxes, $22,545
B. 2,400 boxes $22,545
C. 5,000 boxes $22,545
D. 10,000 boxes $22,973