Which of the following is NOT a traditional reason for carrying inventory? a.to satisfy customer demand b.to avoid shutting down manufacturing facilities c.to support a reliable production process

Which of the following is NOT a traditional reason for carrying inventory?

a.to satisfy customer demand

b.to avoid shutting down manufacturing facilities

c.to support a reliable production process

d.to hedge against future price increases

 

 

 

22.What is the formula to calculate ordering cost?

a.number of orders per year ? cost of placing an order

b.number of orders per year/cost of placing an order

c.average number of units in inventory ? cost of carrying one unit in inventory

d.average number of units in inventory/cost of carrying one unit in inventory

 

 

 

23.What is the formula to calculate total carrying cost?

a.number of orders per year ? cost of placing an order

b.number of orders per year/cost of placing an order

c.average number of units in inventory ? cost of carrying one unit in inventory

d.average number of units in inventory/cost of carrying one unit in inventory

 

 

 

24.What is the economic order quantity (EOQ)?

a.the quantity that minimizes total ordering cost

b.the quantity that maximizes total profit

c.the quantity that minimizes total inventory-related costs

d.the quantity that maximizes carrying costs

 

 

 

25.What costs do the ordering costs become when the economic order quantity (EOQ) model is applied to units produced within the company?

a.setup costs

b.stockout costs

c.carrying costs

d.safety-stock costs

 

 

 

26.Carter Company orders 250 units at a time and places 15 orders per year. Total ordering cost is $1,600, and total carrying cost is $1,250. What is the economic order quantity?

a.The economic order quantity (EOQ) is 250.

b.The economic order quantity (EOQ) is more than 250.

c.The economic order quantity (EOQ) is less than 250.

d.The economic order quantity (EOQ) is 15.

 

 

 

27.Carter Company orders 250 units at a time and places 15 orders per year. Total ordering cost is $1,100, and total carrying cost is $1,750. What is the economic order quantity?

a.The economic order quantity (EOQ) is 250.

b.The economic order quantity (EOQ) is more than 250.

c.The economic order quantity (EOQ) is less than 250.

d.The economic order quantity (EOQ) is 15.

 

 

 

28.Carter Company orders 250 units at a time and places 15 orders per year. Total ordering cost is $1,100, and total carrying cost is $1,100. Which best describes the economic order quantity?

a.The economic order quantity (EOQ) is 250.

b.The economic order quantity (EOQ) is more than 250.

c.The economic order quantity (EOQ) is less than 250.

d.The economic order quantity (EOQ) is 15.

 

 

 

29.Which of the following occurs under a JIT system?

a.Customer demand pulls units through the production line.

b.Safety stock is set at relatively high levels.

c.Stockouts are never a problem.

d.Inventory levels are set at 10% of total production levels.

 

 

 

30.How does a JIT system respond to the problems traditionally solved by carrying inventories?

a.by ensuring that sufficient inventory is on hand to prevent stockouts

b.by purchasing extra materials when price discounts are offered

c.by negotiating long-term contracts with supplier to lock in low prices

d.by selecting an inventory level that minimizes the total of ordering and carrying costs

 

 

 

Last year, Delbert Company produced 10,000 units and sold 9,000 units at a price of $9 per unit. Costs for last year were as follows:

 

Direct materials$10,000

Direct labour15,000

Variable factory overhead5,000

Fixed factory overhead20,000

Variable selling expense7,200

Fixed selling expense5,000

Fixed administrative expense12,000

 

Fixed factory overhead is applied on the basis of expected production. Last year, Delbert expected to produce 10,000 units.