This document contains a chapter of multiple choice computational questions about inventory management. It includes 17 questions covering topics like economic order quantity, order point, safety stock, carrying costs, and total annual inventory costs. The questions provide data on annual demand, ordering costs, carrying costs, lead times, and ask the reader to calculate values like EOQ, number of orders per year, reorder point, maximum inventory level, and total annual costs.
This document contains a chapter of multiple choice computational questions about inventory management. It includes 17 questions covering topics like economic order quantity, order point, safety stock, carrying costs, and total annual inventory costs. The questions provide data on annual demand, ordering costs, carrying costs, lead times, and ask the reader to calculate values like EOQ, number of orders per year, reorder point, maximum inventory level, and total annual costs.
This document contains a chapter of multiple choice computational questions about inventory management. It includes 17 questions covering topics like economic order quantity, order point, safety stock, carrying costs, and total annual inventory costs. The questions provide data on annual demand, ordering costs, carrying costs, lead times, and ask the reader to calculate values like EOQ, number of orders per year, reorder point, maximum inventory level, and total annual costs.
This document contains a chapter of multiple choice computational questions about inventory management. It includes 17 questions covering topics like economic order quantity, order point, safety stock, carrying costs, and total annual inventory costs. The questions provide data on annual demand, ordering costs, carrying costs, lead times, and ask the reader to calculate values like EOQ, number of orders per year, reorder point, maximum inventory level, and total annual costs.
1. A company orders 10,000 units (a one-year supply) of material
X at one time. Material X costs P1 per unit, and order costs amount to P500 each time an order is placed The costs to carry Material X in inventory amount to 20% of the materials cost.
For an entire year, the inventory carrying costs and order costs are: a. P1,500 b. P2,000 c. P500 d. 1,000
10,000 X P500 + P1 x .20 x 10,000 = P1,500
10,000 2
2. There are 1,000 trolls in stock, and 1,500 are due in from orders that are placed previously. The company sells Trolls at the rate of 100 per day and finds that it takes an average of 20 days for an order to be received. Because usage and lead times are known with certainty and because the company has determined that an order must be placed now, the desired safety stock quantity must be equal to: a. 500 units b. 1,000 units c. 2,500 units d. 100 units
3. Jess Company has a plant that manufactures transistor radios.
One component is an XT Transistor. Expected demand is for 5,200 of these transistors in March 2018. Jess estimates the ordering cost per purchase order to be P250. The carrying cost for one nit of XT in stock is P5.
What is the EOQ for the XT Transistor?
a. 721 b. 521 c. 520 d. 720
EOQ = √
=√
=√
EOQ = 721
4. Using the data in No.3 what is the number of deliveries of XT in
April 2018? a. 7.2 (rounded up to 8 deliveries in March 2018) b. 8.2 (rounded up to 9 deliveries in March 2018) c. 6.5 (rounded up to 7 deliveries in March 2018) d. 5.8 (rounded up to 6 deliveries in March 2018)
5,200 / 721 = 7.2
5. Basketball Inc, operated a megastore featuring sports
merchandise. It uses EOQ decision model to make inventory decisions. It is now considering inventory decisions for its PBA’s
jerseys product line. This is highly popular item. Data for 2018 are: Expected annual demand for PBA 10,000 Ordering costs for purchase order P225 Carrying costs per year P10 per jersey
Each jersey costs Basketball Inc, P40 (12% x P40 purchase price) plus P5.20 in relevant insurance, handling, and theft-related costs. The purchasing lead time is 7 days. Basketball, Inc is open 365 days a year.
What is the EOQ?
a. 671 jerseys b. 751 jerseys c. 550 jerseys d. 851 jerseys
EOQ = √
=√
=√
= 670.82
EOQ = 671
6. Using the data in No. 5, what is the number of order that will be placed each year? a. 15 orders b. 20 orders c. 25 orders d. 30 orders
7. Using the data in No.5 what is the reorder point? Rounded.
a. 192 jerseys b. 180 jerseys c. 200 jerseys d. 105 jerseys
Demand each = D e Working day Number of Working Days
= 10,000 365 = 27. 39 or 27.40 jerseys per day
Reorder point = 27.40 x 7 = 191.8
= 191.80 or 192 jerseys
8. The annual demand for tennis racquets is 50,000 units, and
carrying costs amount to P2 per unit. Order costs of the company amount to P5. The optimum order quantity in units for tennis racquets is (round to the nearest unit): a. 500 b. 250 c. 100 d. 625
10. The Leo Company wishes to determine the amount of
safety stock that it should maintain for product D to result in the lowest cost. The following information is available: Stockout Cost P80 per occurrence Carrying cost of Safety stock P2 per unit Number of Purchase orders 5 per year
The options available to Leo are as follows:
Units of Safety Stock Probability of Running out of Safe Stock
10 50% 30 30% 50 10% 55 5%
What is the number of units of safety stock that will result in the lowest cost?
a. 55 b. 50 c. 50 d. 10
11. Aries Company has an order point at 1,400 units, usage
during normal lead time of 600 units, and an EOQ of 2,000 nits. Its maximum inventory assuming normal lead time and usage, would be: a. 2,800 units b. 3,400 units c. 2,000 units d. 1,200 units
12. The following data refer to various annual costs relating to
the inventory of a single product company:
Units transportation cost on purchases P.20
Storage cost per unit .12 Insurance cost per unit .10 Annual interest forgone from alternative 800 Investment of funds Annual number of units required 10,000 What is the annual carrying cost per unit? a. P.30 b. P.42 c. P.50 d. P.22
P.12 + P.10 + P800 =?
10,000 P.12 + P.10 + 0.08 =? 0.22 + 0.08 =0.30
13. The following data relates to Bull Company’s Material X:
Annual Usage in units 7,200
Working days per year 240 Normal lead time in working days 20 Maximum lead time in working days 45 Assuming that the units of Material X will be required evenly throughout the year, the safety stock and order point would be:
14. Venus Manufacturing Company uses 1,000 units of Chip
annually in its production. Order costs consist of P10 for placing a long-distance call to make the order and P40 for delivering the order by truck to the company warehouse. Each Chip costs P100 and the carrying costs are estimated at 15.625% of the inventory cost. What is the economic order quantity for Chip? a. 80 b. 90 c. 100 d. 120
EOQ = √
=√
=√
=√ = 80
15. Using the date in No. 14, what is the total order cost? a. P625 b. P550
Order Cost = RU X CO EOQ =1,000 x P50 80 = 50,000 80 = P625
16. Using the data in No. 14, what is the carrying cost for the year? a. P625 b. P650 c. P550 d. P525
CC = ½ x EOQ x CU x CC = ½ x 80 x P100 x .15625 = 40 x 15.625 = P625
17. Pluto Company has developed the following data to
assist in controlling one of its material inventory items:
Economic Order Quantity 1,000 liters
Average Daily use 100 liters Maximum Daily Use 120 liters Working days per year 250 days Safety Stock 140 liters Cost of Carrying Inventory P1.00 per liter per year
a. 840 liters b. 800 liters c. 900 liters d. 830 liters
Safety Stock + (Average daily use x Lead Time )
140 + (100 x 7 days) = 840 liters
18. Using the data in No. 17, what is the average inventory? a. 640 liters b. 650 liters c. 740 liters d. 700 liters
140 + (1,000 / 2) = 640 liters
19. Using the data in No. 17, what is the maximum inventory assuming normal lead time and usage? a. 1,140 liters b. 1,400 liters c. 1,200 liters d. 1,240 liters
140 + 1,000 = 1,140 liters
20. Using the date in No. 17, what is the cost of placing one order? a. P20 b. P25
21. The cloth Center, Inc. buys and sells fabrics to a wide range of industrial and consumer users. One of the products it carries is denim cloth, used in the manufacture of jeans and carrying bags. The supplier for the denim cloth pays all incoming freight. No incoming inspection of the denim is necessary because the supplier has a track record of delivering high-quality merchandise. The purchasing officer of the Cloth Center, Inc. has collected the following information: Annual Demand for denim cloth 20,000 yards Ordering costs per purchase order P160 Carrying costs per year 205 purchase costs Safety stock requirements None Cost of denim Cloth P8 per year The purchasing lead time is 2 weeks. The Cloth center is open 250 days a year (50weeks for 5 days a week)
