Exam 10: Order Quantities

An item has an annual demand of 25,000 units, a unit cost of $10, an order preparation cost of $10, and a carrying cost of 20%. It is ordered on the basis of an economic order quantity, but the supplier has offered a 2% discount on orders of $10,000 or more. Should the supplier's offer be accepted?

An item has an annual demand of $5,000, preparation costs of $20 per order, and a carrying cost of 20%. What is the EOQ in dollars?

The annual demand is 10,000 units, the ordering cost if $30 per order, the carrying cost is 20% and the unit cost if $15. The order quantity is 600 units. Calculate the a. annual ordering cost, b. the annual carrying cost, and c. the total annual cost.

Discuss the characteristics or assumptions of the non instantaneous receipt model.

Demand is not uniform and stock must be built ahead. It is better to plan a buildup of____________ inventory based on capacity and future demand.

There is no reason to calculate the EOQ for made- to- order items in which the customer specifies the order quantity,t he shelf life of the product is short, or the length of the run is limited by tool life or raw material batch size.

Since the total cost is relatively ____________ around the EOQ, it is ____________ to have exact values.

As the order quantity increases, the average inventory and the annual cost of carrying inventory decrease.

Discuss the assumptions of the EOQ model.

Parts are often ordered in convenient packages such as pallet loads, cases, or dozens, and it is adequate to pick the package quantity closest to the EOQ.

Some suppliers require a minimum order.

One problem in using the EOQ formula is in determining the cost of ordering and the cost of carrying inventory.

There is an order quantity in which the sum of the ____________ is a minimum.

The ____________curve is flat at the bottom.

The buyer must decide whether to accept a quantity discount and must consider ____________costs.

The annual demand for a SKU is 10,075 units and it is ordered in quantities of 650 units. Calculate the average inventory and the number of orders placed per year.

If demand is lumpy and replenishment occurs over time, EOQ will produce the best results.

The objectives of inventory management are to provide the required level of customer service and to reduce the sum of all costs involved. What questions must be answered to achieve these objectives?

____________depend on the quantity ordered.

For a family of items, the ordering costs and the carrying costs are generally the same for each item.