Question 1

eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

-Refer to the figure.If there is a delay in shipping the item,approximately how many days can be covered by the safety stock?

Accepted Answer

The safety stock is designed to cover 100 units, and with an average daily demand of 25 units, the safety stock can cover approximately 4 days (100 units / 25 units per day = 4 days).

Question 2

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.If there is a delay in shipping the item,approximately how many days can be covered by the safety stock?

Accepted Answer

The safety stock is 80 units, and the average daily demand is 10 units. Therefore, the safety stock can cover 80 / 10 = 8.00 days.

Question 3

Willie 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?

Accepted Answer

Increasing the order quantities will result in an increase in the inventory carrying costs as more inventory would be held for longer periods. On the other hand, the ordering costs may decrease as the number of orders would decrease due to larger order quantities. However, the overall impact would be an increase in the total amount of annual carrying and ordering costs.

Question 4

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.If demand remains the same,what is the impact on the number of orders made during the year?

Accepted Answer

Decreasing the size of inventory order quantities while demand remains the same will increase the number of orders needed to meet that demand, as smaller quantities will be ordered more frequently.

Question 5

eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

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

Accepted Answer

The reorder point formula is: $ \text{Reorder Point} = (\text{Average Daily Demand} \times \text{Lead Time in Days}) + \text{Safety Stock} $. Given the average daily demand is 25 units and the normal lead time is 10 days, the calculation is $25 \times 10 + 100 = 250 + 100 = 350$ units.

Question 6

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 cost of placing an order?

Accepted Answer

The answer of Burley Company has the following information available...

Question 7

eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

-Refer to the figure.What is the economic order quantity for this item?

Accepted Answer

The economic order quantity (EOQ) is the optimal quantity of inventory to order at a time to minimize the total inventory costs. The EOQ is given by the following formula:EOQ = √(2*D*O)/Hwhere:D = annual unit demandO = cost of placing an orderH = unit carrying cost per yearIn this case, the EOQ is:EOQ = √(2*5,625*$32)/$4 = 300 unitsTherefore, the correct answer is B) 300 units.

Question 8

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.The company operates 200 days a year,the lead time for the item is 10 days,and the safety stock is 100 units.What is the reorder point?

Accepted Answer

The reorder point is calculated as the sum of the safety stock and the product of average daily demand and lead time. Given the average daily demand is 10 units and the lead time is 10 days, the demand during lead time is $10 \times 10 = 100$ units. Adding the safety stock of 100 units gives a total of $100 + 100 = 200$ units. However, the correct answer is 170 units, which suggests there might have been a mistake in the question details or options provided. Typically, the reorder point formula is used correctly, but the options may not accurately reflect the calculation based on the provided data.

Question 9

How does JIT reduce lead times to meet delivery dates?

Accepted Answer

JIT (Just-in-Time) reduces lead times by minimizing setup times for production processes. This reduces the time needed to switch between different products or operations and allows for faster production of orders, enabling companies to meet delivery dates without having excess inventory or relying on overtime. B and D may provide short-term solutions, but they are not sustainable or efficient methods for meeting delivery dates in the long run. Having more inventory available (C) goes against the principles of JIT, which aim to minimize inventory and waste.

Question 10

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

The reorder point is calculated as the sum of the product of average daily demand and normal lead time in days, plus the safety stock. Here, it's (10 units/day * 12 days) + 80 units = 120 units + 80 units = 200 units.

Question 11

Which of the following are strategic objectives of JIT?

Accepted Answer

JIT aims to improve a firm's competitive position by reducing waste, minimizing inventory, and increasing efficiency. Increasing inventory and inventory cost are not strategic objectives of JIT, and improving non-value-added activities is contrary to the idea of reducing waste.

Question 12

Refer to the figure.If the company operates 200 days a year and the lead time for the item is five days,what is the reorder point if a safety stock of 50 units is maintained?

Accepted Answer

The reorder point formula is (Average daily demand x lead time) + safety stock. Using the information in the figure, the average daily demand is 100 units/day, the lead time is 5 days, and the safety stock is 50 units. Substituting these values into the formula gives: (100 units/day x 5 days) + 50 units = 550 units. Therefore, the reorder point with a safety stock of 50 units is 550 units, which is option D.

Question 13

How are the objectives of JIT achieved?

Accepted Answer

The objectives of JIT are achieved by controlling costs, improving delivery performance, and improving quality. This is because JIT focuses on reducing waste, increasing efficiency, and producing only what is needed when it is needed, which can lead to cost savings. It also emphasizes on having a smooth and timely flow of materials and information, thus improving delivery performance. Lastly, JIT places a high priority on quality by reducing defects and errors, which in turn leads to customer satisfaction and loyalty.

Question 14

What order quantity is used in the EOQ model?

Accepted Answer

The order quantity used in the EOQ model refers to the amount of inventory ordered at one time. This is because the EOQ model calculates the optimal order quantity that minimizes total inventory costs, including ordering costs and holding costs, for a given demand and lead time. Therefore, the order quantity must be a specific quantity that can be ordered at once. Options A, B, and C refer to different units of measurement and are not directly relevant to the EOQ model.

Question 15

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

Accepted Answer

The numerator under the square root in the Economic Order Quantity (EOQ) equation includes the annual demand and the cost of placing an order. This is because the EOQ formula is designed to minimize the total holding costs and ordering costs.

Question 16

Waterhouse 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?

Accepted Answer

When Waterhouse Company decreases the size of inventory order quantities, the annual ordering costs will increase because they will have to order more frequently. However, the annual carrying costs will decrease because they will hold less inventory on average. The overall impact on the total amount of annual carrying and ordering costs is an increase, as the increase in ordering costs typically outweighs the savings in carrying costs.

Question 17

What does the economic order quantity measure?

Accepted Answer

The economic order quantity (EOQ) measures the minimum total annual inventory costs. This is the quantity of inventory that should be ordered at one time to minimize both ordering costs (costs of placing and receiving an order) and holding costs (costs of storing and managing inventory). The EOQ formula takes into account the demand rate, ordering costs, and holding costs to determine the optimal number of units to order. By ordering the EOQ, a company can ensure that inventory shortages are avoided and costs are minimized.

Question 18

What is the reorder point in the EOQ model?

Accepted Answer

The reorder point in the EOQ model is the inventory level at which an order for additional units is placed. This is the level at which the inventory is depleted enough that it triggers the need for a new order to be placed, in order to maintain a certain level of inventory on hand.

Question 19

Which of the following equations determines the total annual carrying costs when no safety stock is kept?

Accepted Answer

The equation for total annual carrying costs when no safety stock is kept is determined by the unit carrying costs per year multiplied by one-half of the order quantity. This is because, without safety stock, the inventory level will fluctuate between zero and the order quantity, with an average inventory level of one-half of the order quantity. Therefore, the carrying cost is only applied to the average inventory level, which is one-half of the order quantity. Choice D is the only option that includes the unit carrying costs per year and one-half of the order quantity.

Question 20

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

Accepted Answer

The Economic Order Quantity (EOQ) formula is primarily used to determine the optimum size of a production run or order that minimizes the total costs related to ordering and holding inventory.

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

Willie 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?

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.If demand remains the same,what is the impact on the number of orders made during the year?

How does JIT reduce lead times to meet delivery dates?

Which of the following are strategic objectives of JIT?

Refer to the figure.If the company operates 200 days a year and the lead time for the item is five days,what is the reorder point if a safety stock of 50 units is maintained?

How are the objectives of JIT achieved?

What order quantity is used in the EOQ model?

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

Waterhouse 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?

What does the economic order quantity measure?

What is the reorder point in the EOQ model?

Which of the following equations determines the total annual carrying costs when no safety stock is kept?

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