Inventory Management Paper 7

1

When the economic order quantity (EOQ) model is used for a firm that manufactures its inventory, ordering costs consist primarily of






2

An inventory management technique designed to minimize inventory investment by having materials arrive at the time they are needed for use is known as






3

All of the following are carrying costs of inventory except






4

Valley, Inc., uses 400 lbs. of a rare isotope per year. The isotope costs $500 per lb., but the supplier is offering a quantity discount of 2% for order sizes between 30 and 79 lbs. and a 6% discount for order sizes of 80 lbs. or more. The ordering costs are $200. Carrying costs are $100 per lb. of material and are not affected by the discounts. If the purchasing manager places eight orders of 50 lbs. each, the total cost of ordering and carrying inventory, including discounts lost, will be






5

A review of the inventories of Cedar Grove Company shows the following cost data for entertainment centers.
Invoice price $400.00 per unit
Freight and insurance on shipment 20.00 per unit
Insurance on inventory 15.00 per unit
Unloading 140.00 per order
Cost of placing orders 10.00 per order
Cost of capital 25
What are the total carrying costs of inventory for an entertainment center?






6

Paint Corporation expects to use 48,000 gallons of paint per year costing $12 per gallon. Inventory carrying cost is equal to 20% of the purchase price. The company uses its inventory at a constant rate. The lead time for placing the order is 3 days, and Paint Corporation holds 2,400 gallons of paint as safety stock. If the company orders 2,000 gallons of paint per order, what is the cost of carrying inventory?






7

James Smith is the new manager of inventory at American Electronics, a major retailer. He is developing an inventory control system and knows he should consider establishing a safety stock level. The safety stock can protect against all of the following risks except for the possibility that






8

Carnes Industries uses the economic order quantity (EOQ) model as part of its inventory control program. An increase in which one of the following variables would increase the EOQ?






9

Which one of the following is not explicitly considered in the standard calculation of economic order quantity (EOQ)?






10

Which one of the following statements concerning the economic order quantity (EOQ) is correct?






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