Deck 7: Independent Demand Inventory Management

Question 1

We need 3,000 units per year at a unit price of $25 and at a cost of $75 per order, with a carrying cost of 20%.

-What is the EOQ size of each order?

A)250
B)275
C)350
D)325
E)300

Answer 1

300

Question 2

We need 3,000 units per year at a unit price of $25 and at a cost of $75 per order, with a carrying cost of 20%.

-What is the annual order cost?

A)$750
B)$900
C)$818
D)$643
E)$692

Answer 2

$750

Question 3

We need 3,000 units per year at a unit price of $25 and at a cost of $75 per order, with a carrying cost of 20%.

-What is the annual inventory carrying cost?

A)$692
B)$818
C)$643
D)$750
E)$900

Answer 3

$750

Question 4

We need 3,000 units per year at a unit price of $25 and at a cost of $75 per order, with a carrying cost of 20%.

-What is the total annual inventory cost?

A)$1,525
B)$2,000
C)$1,500
D)$1,750
E)$1,600

Question 5

We need 3,000 units per year at a unit price of $25 and at a cost of $75 per order, with a carrying cost of 20%.

-How many orders per year will be made?

A)15
B)10
C)20
D)25
E)22

Question 6

Methawks Corporation has the following information:
Average demand = 30 units per day
Average lead time = 40 days
Item cost = $45
Ordering cost = $50
Inventory carrying cost = 15%
The business year is 300 days.

-What is the EOQ size of each order?

A)365
B)398
C)402
D)287
E)300

Question 7

Methawks Corporation has the following information:
Average demand = 30 units per day
Average lead time = 40 days
Item cost = $45
Ordering cost = $50
Inventory carrying cost = 15%
The business year is 300 days.

-What is the annual order cost?

A)$1,131
B)$1,205
C)$1,232
D)$1,359
E)$1,500

Question 8

Methawks Corporation has the following information:
Average demand = 30 units per day
Average lead time = 40 days
Item cost = $45
Ordering cost = $50
Inventory carrying cost = 15%
The business year is 300 days.

-What is the annual inventory carrying cost?

A)$1,343
B)$1,357
C)$969
D)$1,012
E)$1,232

Question 9

Methawks Corporation has the following information:
Average demand = 30 units per day
Average lead time = 40 days
Item cost = $45
Ordering cost = $50
Inventory carrying cost = 15%
The business year is 300 days.

-What is the total annual inventory cost?

A)$2,476
B)$2,465
C)$2,337
D)$2,512
E)$2,474

Question 10

Methawks Corporation has the following information:
Average demand = 30 units per day
Average lead time = 40 days
Item cost = $45
Ordering cost = $50
Inventory carrying cost = 15%
The business year is 300 days.

-How many orders per year will be made?

A)23
B)31
C)25
D)22
E)30

Question 11

Methawks Corporation has the following information:
Average demand = 30 units per day
Average lead time = 40 days
Item cost = $45
Ordering cost = $50
Inventory carrying cost = 15%
The business year is 300 days.

-What is the time between each order?

A)10 days
B)18 days
C)15 days
D)12 days
E)20 days

Question 12

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-What is the EOQ size of each order?

A)700
B)650
C)740
D)612
E)671

Question 13

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-What is the annual order cost?

A)$857
B)$939
C)$900
D)$970
E)$1,036

Question 14

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-What is the annual inventory carrying cost?

A)$970
B)$900
C)$939
D)$857
E)$1,036

Question 15

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-What is the total annual inventory cost?

A)$1,878
B)$1,800
C)$1,715
D)$2,072
E)$1,940

Question 16

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-How many orders per year will be made?

A)32
B)35
C)25
D)20
E)29

Question 17

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-What is the time between each order?

A)20 days
B)9 days
C)15 days
D)25 days
E)7 days

Question 18

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-Calculate the reorder point.

A)479 units
B)600 units
C)575 units
D)500 units
E)700 units

Question 19

Gartner Manufacturing Inc. purchases a component from a Malaysian supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20%. The company's order cost is $30.00.

-If the company decides to order 1,750 units each time it places an order, what will be the total annual cost of this policy? (Do not include the product cost in your answer.)

A)$1,714
B)$300
C)$2,450
D)$2,750
E)$3,000

Question 20

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-Calculate the EOQ for Option A.

A)80 units
B)83 units
C)84 units
D)85 units
E)Do not have enough information to compute

Question 21

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-Calculate the EOQ for Option B.

A)80 units
B)83 units
C)84 units
D)85 units
E)Do not have enough information to compute

Question 22

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-Calculate the EOQ for Option C.

A)80 units
B)83 units
C)84 units
D)85 units
E)Do not have enough information to compute

Question 23

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-What is the total annual inventory cost for Option A?

A)$20,370
B)$21,661
C)$20,971
D)$21,580
E)Do not have enough information to compute

Question 24

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-What is the total annual inventory cost for Option B?

A)$20,370
B)$21,661
C)$20,971
D)$21,580
E)Do not have enough information to compute

Question 25

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-What is the total annual inventory cost for Option C?

A)$20,370
B)$21,661
C)$20,971
D)$21,580
E)Do not have enough information to compute

Question 26

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-Which purchasing option should the small refrigeration shop take?

A)Option A
B)Option B
C)Option C
D)All of the options have similar total annual inventory costs.
E)Do not have enough information to answer the question

Question 27

A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. The company determined that its inventory carrying cost is 20%.


-Based on the above calculations, how many units the shop should order each time?

A)49 units
B)84 units
C)99 units
D)100 units
E)Do not have enough information to answer the question

Question 28

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-What is the EOQ size of each order?

A)150 units
B)350 units
C)200 units
D)245 units
E)300 units

Question 29

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-What is the total annual inventory cost?

A)$110
B)$55
C)$220
D)$200
E)$250

Question 30

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-The supplier tells Wonderful's purchasing agent that the supplier can sell each shampoo bottle for $2.50 each if Wonderful buys a minimum of 300 units at a time. What will be the total annual inventory cost with the new supplier offer?

A)$2,360
B)$101.25
C)$2,375
D)$1,950
E)$2,000

Question 31

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-Based on the annual total inventory cost values, which offer should Wonderful take?

A)$3.00 per bottle for 245 units
B)$3.00 per bottle for 299 units
C)$2.50 per bottle for 245 units
D)$2.50 per bottle for 300 units
E)Do not have enough information to answer the question

Question 32

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-Susan's Eatery makes and delivers pad thai for lunch to residential customers and wants to know the reorder point for the custom-made lunch boxes, given the following information: Average daily demand is 100 pad thai lunches, with a daily standard deviation of 17 lunches. The lead time for lunch box purchases is 4 days. Susan's Eatery wants a 95% service level. Calculate the reorder point.

A)460
B)450
C)456
D)465
E)Do not have enough information to answer the question

Question 33

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-Susan's Eatery makes and delivers pad thai for lunch to residential customers and wants to know the reorder point for the custom-made lunch boxes, given the following information: Average daily demand is 100 pad thai lunches, with a daily standard deviation of 17 lunches. The lead time for lunch box purchases is 4 days, with a lead time standard deviation of 2 days. Susan's Eatery wants a 98% service level. Calculate the reorder point.

A)816
B)733
C)798
D)873
E)Do not have enough information to answer the question

Question 34

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-Abraham's Eatery uses a lunch box supplier that has a sales rep come by weekly to order boxes. Abraham wants a 98% service level. Abraham's average daily demand is 100 lunches, with a daily standard deviation of 17 lunches. The lead time for lunch box purchases is 4 days. If there are 400 lunch boxes when the rep comes by, how many boxes should be ordered?

A)830
B)1,216
C)793
D)816
E)Do not have enough information to answer the question

Question 35

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-The lead time for KraftyCity workbenches is 3 weeks, with a standard deviation of 1.2 weeks, and the average weekly demand is 24, with a standard deviation of 8 workbenches. What should the reorder point be if KraftyCity wants to provide a 95% service level?

A)138
B)124
C)135
D)147
E)Do not have enough information to answer the question

Question 36

The Wonderful Hair Salon buys lots of shampoos. Wonderful follows the exponential-smoothing forecasting method, and based on their forecast calculations, annual demand is 750 units. Wonderful normally pays $3.00 per shampoo bottle when ordering from its supplier. Each order that is placed with the supplier costs $18 to process. Wonderful's holding cost for shampoos is 15% of the cost of the shampoo bottle per year.

-Now suppose the supplier of workbenches guarantees KraftyCity that the lead time will be a constant 3 weeks, with no variability (i.e., standard deviation of lead time = 0). Using the average weekly demand as 24, with a standard deviation of 8 workbenches and a service level of 95%, calculate the reorder point.

A)95
B)99
C)102
D)105
E)Do not have enough information to answer the question

Question 37

The Cosmopolitan store wants to use a periodic review system for its basic apparel product. The product has an annual demand of 7,200 units. Their order cost is $75, and their inventory carrying cost is 18% per dollar per year. The cost of each product is $20. The purchase order lead time is 1 week, and the average daily demand is 18 units, with a standard deviation of 4 units. Cosmopolitan would like to maintain a 99% service level.

-What is the EOQ size of each order?

A)548 units
B)500 units
C)600 units
D)525 units
E)575 units

Question 38

The Cosmopolitan store wants to use a periodic review system for its basic apparel product. The product has an annual demand of 7,200 units. Their order cost is $75, and their inventory carrying cost is 18% per dollar per year. The cost of each product is $20. The purchase order lead time is 1 week, and the average daily demand is 18 units, with a standard deviation of 4 units. Cosmopolitan would like to maintain a 99% service level.

-What is the target inventory level?

A)548 units
B)666 units
C)706 units
D)716 units
E)723 units

Question 39

The Cosmopolitan store wants to use a periodic review system for its basic apparel product. The product has an annual demand of 7,200 units. Their order cost is $75, and their inventory carrying cost is 18% per dollar per year. The cost of each product is $20. The purchase order lead time is 1 week, and the average daily demand is 18 units, with a standard deviation of 4 units. Cosmopolitan would like to maintain a 99% service level.

-Calculate the order quantity, based on the target inventory level computed in Question 42 and if the current inventory level is 350 units when Cosmopolitan conducts the review.

A)356 units
B)373 units
C)366 units
D)316 units
E)198 units

Question 40

The Cosmopolitan store wants to use a periodic review system for its basic apparel product. The product has an annual demand of 7,200 units. Their order cost is $75, and their inventory carrying cost is 18% per dollar per year. The cost of each product is $20. The purchase order lead time is 1 week, and the average daily demand is 18 units, with a standard deviation of 4 units. Cosmopolitan would like to maintain a 99% service level.

-William's food company uses the periodic system to order cans of Cajun seasoning every 30 days. It typically takes the supplier 10 days to resupply William. Sales average 8 units per day, with a standard deviation of 2 units per day. William does not carry any safety stock of Cajun seasoning. If he runs out for a period of time, he doesn't care. William just counted his inventory of Cajun seasoning and found 22 cans on the shelf. How many cans should William order?

A)342
B)218
C)298
D)262
E)Do not have enough information to answer the question

Question 41

The Cosmopolitan store wants to use a periodic review system for its basic apparel product. The product has an annual demand of 7,200 units. Their order cost is $75, and their inventory carrying cost is 18% per dollar per year. The cost of each product is $20. The purchase order lead time is 1 week, and the average daily demand is 18 units, with a standard deviation of 4 units. Cosmopolitan would like to maintain a 99% service level.

-A hospital's biomedical repair shop uses a 4-week periodic system to maintain the inventory on the catheter unit repair parts. It uses an average 40 adult catheter units, with a standard deviation of 6 catheter units every 4 weeks. Catheter units aren't the most critical item it carries, but the manager would like to avoid the embarrassment of a stockout at least 95% of the time. What should the restocking level be?

A)40 cuffs
B)46 cuffs
C)50 cuffs
D)52 cuffs
E)Do not have enough information to answer the question

Question 42

Clay's Forging at Canal Fulton wants to determine its inventory management performance during its past year of operations. Refer to the following information provided by the company:
Inventory on hand at beginning of the year = $273,000
Inventory on hand at end of the year = $290,000
Annual cost of goods sold = $1,790,000
Average annual accounts receivable = $45,500
Annual credit sales = $102,000
Beginning-of-year accounts payable = $227,500
End-of-year accounts payable = $316,200
Total annual purchases = $1,575,000

-Based on the above information, calculate the inventory days of supply (IDS).

A)57.40
B)63.00
C)157.22
D)162.82
E)Do not have enough information to answer the question

Question 43

Clay's Forging at Canal Fulton wants to determine its inventory management performance during its past year of operations. Refer to the following information provided by the company:
Inventory on hand at beginning of the year = $273,000
Inventory on hand at end of the year = $290,000
Annual cost of goods sold = $1,790,000
Average annual accounts receivable = $45,500
Annual credit sales = $102,000
Beginning-of-year accounts payable = $227,500
End-of-year accounts payable = $316,200
Total annual purchases = $1,575,000

-Based on the above information, calculate the days of receivables outstanding (DRO).

A)57.40
B)63.00
C)157.22
D)162.82
E)Do not have enough information to answer the question

Question 44

Clay's Forging at Canal Fulton wants to determine its inventory management performance during its past year of operations. Refer to the following information provided by the company:
Inventory on hand at beginning of the year = $273,000
Inventory on hand at end of the year = $290,000
Annual cost of goods sold = $1,790,000
Average annual accounts receivable = $45,500
Annual credit sales = $102,000
Beginning-of-year accounts payable = $227,500
End-of-year accounts payable = $316,200
Total annual purchases = $1,575,000

-Based on the above information, calculate the days of payables outstanding (DPO).

A)57.40
B)63.00
C)157.22
D)162.82
E)Do not have enough information to answer the question

Question 45

Clay's Forging at Canal Fulton wants to determine its inventory management performance during its past year of operations. Refer to the following information provided by the company:
Inventory on hand at beginning of the year = $273,000
Inventory on hand at end of the year = $290,000
Annual cost of goods sold = $1,790,000
Average annual accounts receivable = $45,500
Annual credit sales = $102,000
Beginning-of-year accounts payable = $227,500
End-of-year accounts payable = $316,200
Total annual purchases = $1,575,000

-Based on the above information, calculate the cash-to-cash cycle time (CCCT).

A)57.40
B)63.00
C)157.22
D)162.82
E)Do not have enough information to answer the question