10. Company A fails to satisfy some 15% of customers\' orders last month. What i
ID: 336500 • Letter: 1
Question
10. Company A fails to satisfy some 15% of customers' orders last month. What is Company A's in-stock probability? A. 15% B. 85% C. 100% D. Cannot be determined 11. Expanding product variety does not always result in an increase in profit. True or False? 12. When solving for an optimal order quantity in the presence of a quantity discount, a rule of thumb is to select an order quantity which takes advantage of the discount. True or False? 13. Which of the following graphs correctly portrays the relationship between total inventory costs per year (y-axis) and order quantity (x-axis) according to the economic order quantity model? A. B. C. D. 14. C&A sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges C&A $30 per order and $50 per bottle. C&A's annual holding cost percentage is 40%. Assume C&A operates 50 weeks in a year. What is C&A's total ordering and holding cost per year if C&A orders 500 bottles at a time? A. $5036 B. $6800 C. $10036 D. $11800 15. C&A purchases fertilizer for its lawn-care business from a supplier who charges $30 per order and $50 per case. Each case consists of five bags of fertilizer. C&A needs 2000 bags of fertilizer a year. C&A's annual holding costs are 30%. What is C&A's holding cost per case per year? A. $15 B. $10 C. $5 D. $3 16. The optimal order quantity that maximizes expected profit is always equal to the mean of the demand distribution. True or False? 17. A make-to-order system is more suitable if leftover inventory is expensive for the product. True or False? 18. A wide and short density function has a large ____________ relative to the _________. A. standard deviation, mean B. standard deviation, outcome C. mean, standard deviation D. mean, outcome 19. Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives an 80% discount for its bread at the end of the day. What is the underage cost? A. $0.10 B. $0.40 C. $0.50 D. $1.50 20. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $25. Inventory is salvaged for $5. What is its maximum profit? A. $5000 B. $7500 C. $8000 D. $12,500
Explanation / Answer
Answers to first 4 questions is given below:
10. B - 85%
11. True - Increasing product variety may not always lead to more profits as some products might cannibalise the existing ones.
12. False. We should draw out graphs for Total Costs including the material costs and check for steps where the cost curve changes, is the least as per the graph and then choose that quantity.
13. Graph not provided. Cannot be answered without graphs.
14. D - 11,800
Ordering Cost = 30*600*50/500 = 1,800
Inventory Holding Cost = (500/2)*40%*100 = 10,000
Total Ordering + Holding Cost = $11,800
PS: For rest of the questions, please post those questions as separate/individual questions. This is due to limitations and restrictions of answering.
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