Gate Academy DPP 1 IE

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TARGET : GATE 2023/24


Industrial Engineering
Topic : Break Even Analysis and Inventory  DPP ‐ 01 
Date : 27/03/2022  Daily Practice Problem for Mind Map 

Question 1
From the following information, ascertain by how much the value of sales must be increased by the
company to break-even :
Sales - 300000
Fixed cost - 150000
Variable cost - 200000
Question 2
The fixed costs amount to Rs. 50,000 and the percentage of variable costs to sales is given to be 66 ⅔%.
If 100% capacity sales are Rs. 3,00,000, find out the break-even point and the percentage sales when it
occurred. Determine profit at 80% capacity.
Question 3
What should be the selling price per unit, if the break-even point should be brought down to 6,000 units?
Selling price per unit - 20
Fixed cost - 54000
Variable cost per unit - 15
Question 4
Sales Rs. 1,20,000; Variable Costs Rs. 60,000; Fixed costs Rs. 1,00,000. Loss can be made good either
by increasing the sales price or by increasing sales volume. If present selling price is maintained and the
sales volume is increased. What would be sales if a profit of Rs. 1,00,000 is required?
Question 5
Assertion (A) : It is possible to have more than one break-even point in break-even charts.
Reason (R) : All variable costs are directly variable with production.
(A) Both A and R are individually true and R is the correct explanation of A
(B) Both A and R are individually true but R is not the correct explanation of A
(C) A is true but R is false
(D) A is false but R is true
Question 6
ABC analysis in materials management is a method of classifying the inventories based on
(A) The value of annual usage of the items
(B) Economic order quantity
(C) Volume of material consumption
(D) Quantity of materials used

 
TARGET : GATE 2023/24, DPP-01 2 GATE ACADEMY ®
Question 7
Assertion (A) : Selective control manages time more effectively.
Reason (R) : ABC analysis is based on Pareto distribution.
(A) Both A and R are individually true and R is the correct explanation of A
(B) Both A and R are individually true but R is not the correct explanation of A
(C) A is true but R is false
(D) A is false but R is true
Question 8
The annual demand for an item is 3200 parts. The unit cost is Rs. 6 and the inventory carrying charges are
estimated as 25% per annum. If the cost of one procurement is Rs. 150 find :
(i) EOQ
(ii) Number of order per year
(iii) Time between two consecutive order
(iv) The optimal cost
Question 9
A manufacturer uses Rs. 10,000 worth of an item during the year. He has estimated the ordering costs as
Rs.25 per order and carrying costs as 12.5% of average inventory value. Find the optimal order size,
number of orders per year, time period per order and total cost.
Question 10
An item is used at a uniform rate of 50,000 units per year. No shortage is allowed and delivery is at an
infinite rate. The ordering, receiving and hauling cost is Rs. 13 per order, while inspection cost is Rs. 12
per order. Interest costs Rs. 0.056 and deterioration and obsolescence cost Rs. 0.004 respectively per year
for each item actually held in inventory plus Rs. 0.02 per year per unit based on the maximum number of
units in inventory. Calculate the EOQ. If lead time is 20 days, find re-order level.
Question 11
The demand for an item each costing Re 1, is 10,000 units per year. The ordering cost is Rs. 10. Inventory
carrying charge is 20% based on the average inventory per year. Stock-out cost is Rs. 5 per unit of shortage
incurred. Find various parameters.
Question 12
Annual demand for an item is 2400 units. Ordering cost is Rs. 350, inventory carrying charge is 24% of
the purchase price per year. Purchase prices are :
Rs. 10 for purchasing Q1 < 500
Rs. 9.25 for purchasing 500 ≤ Q2 < 750
Rs. 8.75 for purchasing 750 ≤ Q3
Determine the optimum purchase quantity.
Question 13
In the ABC method of inventory control, Group A constitutes costly items. What is the usual percentage
of such items of the total items?
(A) 10 to 20 % (B) 20 to 30 %
(C) 30 to 40 % (D) 40 to 50 %

 
GATE ACADEMY ® 3 TARGET : GATE 2023/24 : DDP-01
Question 14
Which of the following cost elements are considered while determining the Economic Lot Size for
purchase?
1. Inventory carrying cost
2. Procurement cost
3. Set up cost
Select the correct answer using the codes given below :
(A) 1, 2 and 3 (B) 1 and 2
(C) 2 and 3 (D) 1 and 3
Question 15
Annual demand for a product costing Rs. 100 per piece is Rs. 900. Ordering cost per order is Rs. 100 and
inventory holding cost is Rs. 2 per unit per year. The economic lot size is
(A) 200 (B) 300
(C) 400 (D) 500
Question 16
Consider the following costs: 1. Cost of inspection and return of goods 2. Cost of obsolescence 3. Cost of
scrap 4. Cost of insurance 5. Cost of negotiation with suppliers. Which of these costs are related to
inventory carrying cost?
(A) 1, 2 and 3 (B) 1, 3 and 4
(C) 2, 3 and 4 (D) 2, 4 and 5
Question 17
The annual demand for a product is 64,000 units. The buying cost per order is Rs. 10 and the estimated
cost of carrying one unit in stock for a year is 20 percent. The normal price of the product is Rs. 10 per
unit. However, the supplier offers a quantity discount of 2 percent on an order of at least 1,000 units at a
time, and a discount of 5 percent of the order is for at least 5,000 units. Suggest the most economic
purchase quantity per order.

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