1- As demand increases, the sum of ordering and holding costs per period for the
ID: 374687 • Letter: 1
Question
1- As demand increases, the sum of ordering and holding costs per period for the economic order quantity ___ at a rate ____ than demand.
a- decreases, faster
b- decreases, slower
c- increases, faster
d- increases, slower
2- A bakery sells bread for $2 per loaf that costs $1 per loaf to make. The bakery gives a 70% discount for its bread at the end of the day to clear leftover loaves. What is the cost of overstocking (Co)>
a- 0.1
b- 1
c- 0.4
d- 0.7
3- A company uses Newsvendor formula to order a product. Keeping everything else the same, if the cost of product increases, how would this change the cost of overstocking (Co) and the cost of understocking (Cu)?
a- Co increases and Cu decreases
b- Both decrease
c- Co decreases and Cu increases
d- both increase
4- Two methods are used to predict how many customers will call in for help in the next four days. The first method predicts the number of callers to be 23, 5, 14, and 20 for the four respective days. The second method predicts 20, 13, 14, and 20 for the four respective days. The actual number of callers turns out to be 23, 10, 15, and 19. Which method has the bigger forecast bias?
a- the second method
b- both are equally biased
c- both are not biased
d- the first method
5- Two methods are used to predict how many customers will call in for help in the next four days. The first method predicts the number of callers to be 23, 5, 14, and 20 for the four respective days. The second method predicts 20, 13, 14, and 20 for the four respective days. The actual number of callers turns out to be 23, 10, 15, and 19. Which method has the smaller mean squared error (MSE)?
a- both methods have the same MSE
b- the first method
c- the second method
d- both methods have the zero (0) MSE
6- Bakery A uses 80 bags of chocolate chips each year. The chocolate chips are purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A's annual inventory holding cost percentage is 40%. If bakery A's demand for the chip is double, what will be the percentage change in its economic order quantity?
a- 100% decrease
b- 41% increase
c- 41% decrease
d- 100% increase
A retailer planning to sell jackets during winter faces the following probability distribution of demand for jackets: x Probability(D x) Probability(Dcx) 51 52 53 54 8% 9% 10% 11% 12% 12% 11% 10% 9% 8% 8% 18% 28% 38% 50% 62% 72% , 82% 92% 100% 56 57 58 59 60 The retailer buys each jacket for $400 and sells it for $600. The retailer sells any leftover jacket in the spring sale at $300. What is optimal service level retailer should target and what is the optimal order quantity of jackets? O 66.7% and 57 66.7% and 56 50% and 57 O 50% and SSExplanation / Answer
1 D
EOQ = sqrt(Demand*Ordering cost per order/Holding cost per unit)
Ordering cost + Holding cost = Demand/EOQ*Ordering cost per order + EOQ/2*Holding cost per unit
Hence, as Demand increases, EOQ will increase and so will ordering and holding cost but at a slower rate
2) C
Cost of excess = Cost - discounted price = 1 - (1-0.7)*2 = 0.4
3) A
Cost of overstocking (Co) = Cost - Salvage value
Cost of under stocking (Cu) = Price - cost
Hence, with increase in price, Co will increase and Cu decrease
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