Exam 20: Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Beta Supply Company has an economic order quantity of 400 units for item A. The annual demand for the product is 10,000 units, and the cost of placing an order is $20. Calculate the carrying cost per unit. (Round answer to two decimal places.)

The cost of acquiring inventory includes

Montgomery Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production. Time requirements to produce one unit of A and B are as follows: Product A Product B Labor hours per unit 6 3 Machine hours per unit 2 5 What is the objective function to maximize profits for Montgomery Company?

Dry Creek Company decreased the size of inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100, 200, and 300 units of X, Y, and Z, respectively, what is the expected return?

The costs of holding inventory are called __________ costs.

Hasselblad Company manufactures two different products, X and Y. The company has 100 pounds of materials and 300 direct labor hours available for production. The time requirements and contribution margins per unit are as follows: Froduct Product Y Contribution margin per unit \ 5 \ 6 Materials per unit (lbs.) 2 3 Direct labor hours per unit 5 3 What is the objective function for maximizing profits?

Aeroboats Frame Corporation increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total annual ordering costs?

JIT purchasing is done using

The process of continuous replacement of inventory has been made easier by the use of __________ interchanges.

Knoxville Manufacturing Company produces X and Y with contribution margins per unit of $10 and $90, respectively. Only 200 labor hours and 400 machine hours are available for production. Time requirements to produce one unit of X and Y are as follows: Froduct Product Y Labor hours per unit 1 2 Machine hours per unit 5 1 What is the constraint on machine hours for Knoxville Manufacturing Company?

Alabaster Manufacturing Company increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?

Which of the following is NOT an example of an ordering cost?

The theory of constraints inventory system is also called the:

Which of the following is TRUE about the theory of constraints?

Albuquerque Company has the following information available concerning one of its inventory items: Cost of placing an or der \ 50.00 Unit carrying cost per year \ 2.00 Annual unit demand 3,200 Safety stock 80 Average daily demand 10 Normal lead time in days 12 If there is a delay in shipping the item, approximately how many days can be covered by the safety stock?

Which of the following is NOT an opportunity cost associated with inventory management?

When a product mix does not utilize fully its constraints, they are called loose constraints, when used completely, they are called binding constraints.

A marker or card that specifies the quantity that the preceding process should manufacture is a

One of the traditional reasons for holding inventory is to take advantage of quantity discounts and hedge against future price increases. The JIT solution is to