Question 1

Which of the following equations determines the total annual ordering costs?

Accepted Answer

A) Cost of placing an order * Order quantity 
B) Cost of placing an order *  Number of orders per year 
C) Cost of placing an order *  One-half of the order quantity 
D) Unit carrying costs per year *  Order quantity 
A) Cost of placing an order * Order quantity 
B) Cost of placing an order *  Number of orders per year 
C) Cost of placing an order *  One-half of the order quantity 
D) Unit carrying costs per year *  Order quantity

Question 2

Evans Company has the following information:
 $\begin{array}{ll}
\text { Annual demand } & 4,000 \text { units } \
\text { Order size } & 1,000 \text { units } \
\text { Ordering cost per order } & \$ 500 \
\text { Carrying costs per unit for one year } & \$ 50 \
\text { Lead time (maximum 20 days) } & 10 \text { days } \
\text { Maximum daily use } & 25 \text { units } \
\text { Work year } & 250 \text { days }
\end{array}$ 
a.Determine the economic order quantity for Evans.
b.What is the annual savings to Evans Company if it is to change from an order size of 1,000 to the economic order quantity?
c.What is the reorder point?
d.What is the safety stock needed to prevent stockouts?

Accepted Answer

None

Question 3

Which of the following elements could be determined by using the economic order quantity formula?

Accepted Answer

A) optimum size of production run 
B) reorder point 
C) safety stock 
D) annual demand 
A) optimum size of production run 
B) reorder point 
C) safety stock 
D) annual demand

Question 4

If the objective is to maximize profits in a linear programming problem,what should be the coefficients of the variables in the objective function?

Accepted Answer

A) the selling price per unit 
B) the variable costs per unit 
C) the contribution margin per unit 
D) the fixed costs per unit 
A) the selling price per unit 
B) the variable costs per unit 
C) the contribution margin per unit 
D) the fixed costs per unit

Question 5

Burley Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order}&\$ 50.00\
\text {Unit carrying cost per year }& \$ 2.00 \
\text { Annual unit demand}&3,200\
\text {Safety stock }&80\
\text {Average daily demand }&10\
\text {Normal lead time in days }&12\
\end{array}$

-Refer to the figure.What is the reorder point for the inventory item?

Accepted Answer

A) 200 units 
B) 320 units 
C) 500 units 
D) 970 units 
A) 200 units 
B) 320 units 
C) 500 units 
D) 970 units

Question 6

Following is information pertaining to material that is used in the assembly of automobiles:
 $\begin{array}{ll}
\text { Annual demand } & 4,000 \text { units } \
\text { Unit cost } & \$ 25 \
\text { Cost of placing an order } & \$ 600 \
\text { Carrying cost as a percentage of unit cost } & 10 \%
\end{array}$ 
a.Calculate total annual carrying costs for an order quantity of 200 units per order.
b.Calculate total annual ordering costs for an order quantity of 200 units per order.
c.Determine the optimal order size.

Accepted Answer

a.($25 * 0.10)* (200

Question 7

What does the economic order quantity measure?

Accepted Answer

A) the minimum total annual inventory costs 
B) the maximum total annual inventory costs 
C) no inventory shortages 
D) minimum ordering costs 
A) the minimum total annual inventory costs 
B) the maximum total annual inventory costs 
C) no inventory shortages 
D) minimum ordering costs

Question 8

Heft Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labour hours and 300 machine hours are available for production.
Time requirements to produce one unit of A and B are as follows:
$$\begin{array} { l c c c } 
 & \text { Product A } & \text { Praduct B } \
\text { Labour hours per unit }& 5 & 2 \
\text { Machine hours per unit }  & 1 & 4
\end{array}$$
-Refer to the figure.What is the objective function to maximize profits for Heft Company?

Accepted Answer

A) Maximize 1A + 4B 
B) Minimize 5A + 2B 
C) Maximize 40A + 30B 
D) Minimize 40A + 30B 
A) Maximize 1A + 4B 
B) Minimize 5A + 2B 
C) Maximize 40A + 30B 
D) Minimize 40A + 30B

Question 9

Mislan Incorporated produces two different barrels used in winemaking (X and Y).The company has three processes,cutting,forming,and curing.In cutting,the wood is cut to size and prepared for forming.In forming,the wood is bent to shape and connected together to form the barrel.In curing,the seams are finished and the oak is left to process.In cutting,setup time is 1/2 hour.The other two processes do not have any setup time.The demand for Component X is 100 units per day and the demand for Component Y is 250 units per day.The minutes required per unit for each component are as follows:
 $$\begin{array} { l l l l } 
& \text { Cutting } & \text { Forming } & \text { Curing } \
\text { Component } \mathbf { X } & \text { 30 } & 12 & \mathbf { 8 } \
\text { Companent } \mathbf { Y } & 20 & 15 & 6
\end{array}$$ The company operates one 8-hour shift.The cutting process employs 10 workers.Two hours of their time is used for setup.The forming process is the most labour intensive and has 15 workers.The curing department is not labour intensive-the only significant unit-level variable costs are materials and power.The department employs 6 associates.For component X,the variable cost is $40 per unit and for Component Y,it is $30 per unit.The selling price per barrel is $90 for Component X and $75 for Component Y. 
a.Calculate the estimated daily potential profit.
b.Calculate the resources available for each area.
c.Calculate the resources demanded for each area and identify any bottlenecks.
d.What is the contribution margin per unit of bottleneck resource and what does that imply?

Accepted Answer

The answer of Mislan Incorporated produces two different barrels used...

Question 10

In the economic order quantity equation,what does the numerator under the square root include?

Accepted Answer

A) annual demand and cost of placing an order 
B) annual demand and unit carrying cost 
C) unit carrying cost and cost of placing an order 
D) order quantity and cost of placing an order 
A) annual demand and cost of placing an order 
B) annual demand and unit carrying cost 
C) unit carrying cost and cost of placing an order 
D) order quantity and cost of placing an order

Question 11

The following information is available for Wilson Trailer Company, which sells two products:
$\begin{array}{lcc}
&\text { Trailer A } &\text { Trailer B} \
\text { Processing time } & 2 \text { hours } & 4 \text { hours } \
\text { Vinyl cover used } & 16 \mathrm{sq} \cdot \mathrm{m} . & 12 \mathrm{sq} . \mathrm{m} . \
\text { Selling price } & \$ 50.00 & \$ 80.00 \
\text { Variable cost } & \$ 35.00 & \$ 50.00 \
\text { Fixerl cost } & \$ 10.00 & \$ 20.00
\end{array}$ There are 100 hours available in the plant and 75 square metres of vinyl available per operating period.
-Refer to the figure.What is the objective function for maximizing profits?

Accepted Answer

A) Maximize $15A + $30B 
B) Minimize $15A + $30B 
C) Maximize $35A + $50B 
D) Maximize $50A + $80B 
A) Maximize $15A + $30B 
B) Minimize $15A + $30B 
C) Maximize $35A + $50B 
D) Maximize $50A + $80B

Question 12

The following information is available for Wilson Trailer Company, which sells two products:
$\begin{array}{lcc}
&\text { Trailer A } &\text { Trailer B} \
\text { Processing time } & 2 \text { hours } & 4 \text { hours } \
\text { Vinyl cover used } & 16 \mathrm{sq} \cdot \mathrm{m} . & 12 \mathrm{sq} . \mathrm{m} . \
\text { Selling price } & \$ 50.00 & \$ 80.00 \
\text { Variable cost } & \$ 35.00 & \$ 50.00 \
\text { Fixerl cost } & \$ 10.00 & \$ 20.00
\end{array}$ There are 100 hours available in the plant and 75 square metres of vinyl available per operating period.
-Refer to the figure.Which of the following statements represent the information in the table? 1. The materials constraint favours Trailer B over Trailer A.
2. The time constraint favours Trailer A over Trailer $ B $.
3. The material constraint favours Trailer A over Trailer B.
4. The objective function favours Trailer B over Trailer A.

Accepted Answer

A) 1 and 2 
B) 2 and 3 
C) 3 and 4 
D) 1 and 3 
A) 1 and 2 
B) 2 and 3 
C) 3 and 4 
D) 1 and 3

Question 13

Big Bus Company produces buses. In order to produce the seats for the buses, special equipment must be set up. The setup cost per frame is $40. The cost of carrying seats in inventory is $5 per seat per year. The company produces 100,000 buses per year.
-Refer to the figure.What are the total carrying costs (rounded to the nearest dollar)associated with the economic order quantity?

Accepted Answer

A) $316 
B) $506 
C) $3,163 
D) $3,613 
A) $316 
B) $506 
C) $3,163 
D) $3,613

Question 14

What is another name for the drum-buffer-rope system?

Accepted Answer

A) a traditional inventory system 
B) a JIT inventory system 
C) a TOC inventory system 
D) a TQM inventory system 
A) a traditional inventory system 
B) a JIT inventory system 
C) a TOC inventory system 
D) a TQM inventory system

Question 15

One of the traditional reasons for holding inventory is to avoid a shutdown due to machine failure.What is the JIT solution meant to do?

Accepted Answer

A) reduce setup costs. 
B) reduce lead time. 
C) use total preventive maintenance. 
D) use total quality control. 
A) reduce setup costs. 
B) reduce lead time. 
C) use total preventive maintenance. 
D) use total quality control.

Question 16

Coffee Corporation manufactures two different miniature models of furniture,a table and a chair.The company has 500 metres of lumber,400 machine hours,and 600 direct labour hours available for production.The miniature tables and chairs provide $5 and $4 of contribution margin,respectively.
The time and lumber requirements to build a miniature table or chair are as follows:
$\begin{array}{lcc}
&\text { Table}&\text { Chair}\
\text { Metres of lumber per unit } & 5 & 2 \
\text { Machine hours per unit } & 2 & 3 \
\text { Direct labour hours per unit } & 4 & 2
\end{array}$ 
a.What is the objective function being maximized?
b.What are the constraint equations?
c.Graph the constraint equations.Identify the feasible region.
d.What is the optimal solution?

Accepted Answer

a.Maximize $5T + $4C 
b.Lumber

Question 17

What is the reorder point in the EOQ model?

Accepted Answer

A) the day of the month for reordering 
B) when all of the inventory has been used 
C) when the inventory level is below the order quantity 
D) the inventory level at which an order for additional units is placed 
A) the day of the month for reordering 
B) when all of the inventory has been used 
C) when the inventory level is below the order quantity 
D) the inventory level at which an order for additional units is placed

Question 18

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs.What is the JIT solution meant to do?

Accepted Answer

A) reduce setup costs 
B) reduce lead time 
C) use total preventive maintenance 
D) use total quality control 
A) reduce setup costs 
B) reduce lead time 
C) use total preventive maintenance 
D) use total quality control

Question 19

If inventory consists of goods purchased from an outside supplier,what are the inventory-related costs?

Accepted Answer

A) ordering and carrying costs 
B) setup costs and production costs 
C) ordering and setup costs 
D) production and carrying costs 
A) ordering and carrying costs 
B) setup costs and production costs 
C) ordering and setup costs 
D) production and carrying costs

Question 20

Hassel Company manufactures two different products, X and Y. The company has 100 kilograms of materials and 300 direct labour hours available for production.
The time requirements and contribution margins per unit are as follows:
$\begin{array}{lcc}
&\text {Product X}&\text {Product Y}\
\text { Contribution margin per unit } & \$ 4 & \$ 5 \
\text { Materials per unit (kg) } & 1 & 2 \
\text { Direct labour hours per unit } & 4 & 2
\end{array}$
-Refer to the figure.What is the equation for the constraint on materials?

Accepted Answer

A) $1X + $2Y $\leq $100 
B) $4X + $2Y  $\leq $ 100 
C) $4X + $5Y $\leq $ 100 
D) $4X + $5Y $\leq $ 300 
A) $1X + $2Y $\leq $100 
B) $4X + $2Y  $\leq $ 100 
C) $4X + $5Y $\leq $ 100 
D) $4X + $5Y $\leq $ 300

Which of the following equations determines the total annual ordering costs?

Which of the following elements could be determined by using the economic order quantity formula?

If the objective is to maximize profits in a linear programming problem,what should be the coefficients of the variables in the objective function?

What does the economic order quantity measure?

In the economic order quantity equation,what does the numerator under the square root include?

What is another name for the drum-buffer-rope system?

One of the traditional reasons for holding inventory is to avoid a shutdown due to machine failure.What is the JIT solution meant to do?

What is the reorder point in the EOQ model?

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs.What is the JIT solution meant to do?

If inventory consists of goods purchased from an outside supplier,what are the inventory-related costs?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Filters

Exam 18: Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

Which of the following equations determines the total annual ordering costs?

Which of the following elements could be determined by using the economic order quantity formula?

If the objective is to maximize profits in a linear programming problem,what should be the coefficients of the variables in the objective function?

What does the economic order quantity measure?

In the economic order quantity equation,what does the numerator under the square root include?

What is another name for the drum-buffer-rope system?

One of the traditional reasons for holding inventory is to avoid a shutdown due to machine failure.What is the JIT solution meant to do?

What is the reorder point in the EOQ model?

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs.What is the JIT solution meant to do?

If inventory consists of goods purchased from an outside supplier,what are the inventory-related costs?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Filters