Brs Mdm3 Tif Ch12: Inventory Control Models

Managerial Decision Modeling w/ Spreadsheets, 3e (Balakrishnan/Render/Stair)
Chapter 12 Inventory Control Models

12.1 Chapter Questions

Use this information to answer the following questions.

A bakery buys sugar in 15-pound bags. The bakery uses 5000 bags of sugar each year. Carrying costs are $20 per bag per year. Ordering costs are estimated at $5 per order. Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags. It takes 5 days for each order of sugar to be filled.

1) Refer to the information above. What is the optimal EOQ?
A) 200 bags
B) 5000 bags
C) 2500 bags
D) 100 bags
E) 50 bags
Answer: E
Page Ref: 12-7
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills

2) Refer to the information above. What is the maximum inventory held in a given EOQ cycle?
A) 5000 bags
B) 200 bags
C) 50
D) 100 bags
E) 15 bags
Answer: C
Page Ref: 12-6
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills

3) Refer to the information above. What is the minimum inventory held in a given EOQ cycle?
A) 0 bags
B) 2500 bags
C) 50 bags
D) 25 bags
E) 100 bags
Answer: A
Page Ref: 12-6
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills
4) Refer to the information above. What is the total cost of ordering and carrying sugar?
A) $50
B) $100
C) $25
D) $1000
E) $500
Answer: D
Page Ref: 12-6
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills

5) Refer to the information above. What is the optimal number of orders per year?
A) 200
B) 100
C) 500
D) 300
E) 400
Answer: B
Page Ref: 12-6
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills

6) Refer to the information above. What is the average inventory held in a given cycle?
A) 0
B) 50
C) 25
D) 100
E) 75
Answer: C
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