Question : Objective 20.2 1) Which of the following statements true of the : 1211972

Objective 20.2

1) Which of the following statements is true of the the economic order quantity decision model?

A) The economic order quantity increases with higher demand and higher carrying costs and decreases with higher ordering costs.

B) The simplest version of the economic order quantity model assumes there are only ordering costs, carrying costs, stockout costs, and purchasing costs. 

C) It assumes the purchase order lead time is not known with certainty.

D) The larger the order quantity, the lower the annual relevant ordering costs and the higher the annual relevant carrying costs.

2) Which of the following is the correct mathematical expression to calculate annual relevant ordering costs?

A) Demand in units for a specified period / (Relevant ordering cost per purchase order × Size of each order)             

B) Size of each order × Relevant ordering cost per purchase order / Demand in units for a specified period        

C) (Demand in units for a specified period / Size of each order) × Relevant ordering cost per purchase order          

D) (Demand in units for a specified period – Size of each order) × Relevant ordering cost per purchase order            

3) Under  economic-order-quantity decision model, it is assumed that ________.

A) the quantity ordered can vary at each reorder point

B) demand, ordering costs, and carrying costs are uncertain

C) the purchasing cost per unit is affected by the order quantity

D) no inventory stockouts occur

4) The following information applies to Krynton Company, which supplies microscopes to laboratories throughout the country. Krynton purchases the microscopes from a manufacturer which has a reputation for very high quality in its manufacturing operation.

Annual demand (weekly demand = 1/52 of annual demand)52,000 units

Orders per year20

Lead time in days15 days

Cost of placing an order$100

What is the reorder point?

A) 1,040 units

B) 2,143 units

C) 1,580 units

D) 3,080 units

5) The economic order quantity model completely ignores ________.

A) carrying costs

B) ordering costs

C) stockout costs

D) the size of a purchase order

Answer the following questions using the information below:

Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank and recorded DVDs. DVD Mart purchases tapes from Globe at $25.00 per DVD; DVDs are shipped in packages of 60. Globe pays all incoming freight, and DVD Mart does not inspect the DVDs due to Globe’s reputation for high quality. Annual demand is 312,000 DVDs at a rate of 6,000 DVDs per week. DVD Mart earns 15% on its cash investments. The purchase-order lead time is one week. The following cost data are available:

Relevant ordering costs per purchase order$114.50

Carrying costs per package per year:

Relevant insurance, materials handling,

breakage, etc., per year$ 4.50

6) What is the economic order quantity?

A) 64.08 packages

B) 21.04 packages

C) 37.50 packages

D) 72.03 packages

7) What are the annual relevant ordering costs?

A) $9,057

B) $7,157

C) $8,266

D) $7,121

8) What are the annual relevant carrying costs?

A) $7,122

B) $8,265

C) $9,057

D) $7,157

9) What are the relevant total costs?

A) $14,279

B) $18,114

C)  $16,531

D) $14,278

10) How many deliveries will be made during each time period?

A) 72.19 deliveries

B) 60.11 deliveries

C) 89.23 deliveries

D) 52.18 deliveries