6. Acertain type of computer costs $1,00, and the annual holing cost is 25% Annu

Question

6. Acertain type of computer costs $1,00, and the annual holing cost is 25% Annual demand is 10,000 units, and the order cost is $150 per arder. What is the approximate econamic arder quantity? a. 1 b. 70 c 110 d. 183 e. 600 Mast inventory models attempt to minimize a. the ikelihood of a stockout b. the number of items ordered c. total irrventory based costs d. the number of crders placed e. the safety stock 7. In the basic E00 model, rdemand _ 6,000 wits per yoa, setup cost-S40. unt cost-$10. hoding cost per unit per month-2.5% o econamic order quantity is approximately ? 8. unt cost, the a. 24 b. 100 d. 490 e 1,386 9. Wa the banc Ee r the cet f plscing an order doubies, and al te values remain comtant, the EOQ wil e, increa try etout41% b. increase by 100 c ncrease by 200% d. increase, but more data is needed to say by how much e. ether increase or decrease 10. A product whose t0Q i s 400 experiences a decrease in ardering cost from $90 pur onder to $10. The revised toQ is b one-thrd as lerge nine times as d. one-ninth as large e. cannot bi debermined 11. Aprmtuct whose EOQ is 400 expeneros a 50% incease demand. The new b increased by less than S0 d. increased by more t

Explanation / Answer

Answer to question 7 :

Inventory related costs normally have following two components :

Annual ordering cost

Annual inventory holding cost

Inventory models normally try to minimize sum of these two costs

Therefore. Most inventory related models attempt to minimize “ c. total inventory based costs”

ANSWER : C ) INVENTORY BASED COSTS

Answer to question 8 :

Following are the relevant details :

Annual demand = D = 6000

Set up cost = Cs = $40

Annual unit inventory holding cost = Ch = 2.5% /month x 12 months x $10 = $ 0.3 x $10 = $3

Economic order quantity ( EOQ )

= Square root ( 2 x Co x D/ Cs )

= Square root ( 2 x 40 x 6000/ 3 )

= 400

THE ECONOMIC ORDER QUANTITY IS APPROXIMATELY = 400

Answer to question 9 :

EOQ is proportional to square root of ordering cost

Therefore when cost of order doubles, the Therefore new EOQ becomes square root ( 2 ) = 1.414 or earlier EOQ .

Hence New EOQ increases by 0.414 x 100 – 41.4 % ( approx. 41% )

THE EOQ WILL : a ) INCREASE BY 41%

Answer to question 10 :

EOQ is proportional to square root of ordering cost

When ordering cost becomes $10 from $90, ordering cost becomes 1/9 the of original ordering cost.

Therefore new EOQ becomes = Square root ( 1/9 ) = 1/3 rd of original EOQ

THE REVISED EOQ IS : a) ONE THIRD AS LARGE

Answer to question 11 :

EOQ is proportional to square root of Demand

When demand increases by 50% , new demand becomes 1.5 time of old demand

Therefore new EOQ = Square root ( 1.5 ) = 1.2247 times old EOQ

Therefore , EOQ increases by 22.47% .

Therefore, correct answer is “ b. Increased by less than 50% “

ANSWER: B) INCREASED BY LESS THAN 50%

ANSWER : C ) INVENTORY BASED COSTS

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