COMMERCE 3QA3 Midterm: brs_mdm3_tif_ch12
13 Feb 2019
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Copyright (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
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
2
Copyright (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
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
Page Ref: 12-6
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills
7) Refer to the information above. What are the total annual holding costs?
A) $500
B) $1000
C) $20
D) $750
E) $250
Answer: A
Page Ref: 12-7
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
AACSB: Analytic Skills
3
Copyright (c) 2013 Pearson Education, Inc. publishing as Prentice Hall
8) Refer to the information above. What is the Reorder point (ROP)?
A) 20
B) 100
C) 5
D) 500
E) 15
Answer: B
Page Ref: 12-12
Topic: Reorder Point: Determining When to Order
Difficulty: Moderate
AACSB: Analytic Skills
Use this information to answer the following questions.
A cake factory can produce cakes at the rate of 500 per day. The factory supplies its cakes to local grocery
stores at a rate of 250 per day. The cost to prepare the equipment for producing the cakes is $20. Annual
holding costs are $2 per cake. Assume that the factory operates 250 days a year.
9) Refer to the information above. What is the optimal EPQ?
A) 1389
B) 1425.68
C) 1250.27
D) 1000
E) 1581.14
Answer: E
Page Ref: 12-15
Topic: Economic Production Quantity: Determining When to Produce
Difficulty: Moderate
AACSB: Analytic Skills
10) Refer to the information above. What is the optimal number of yearly setups?
A) 43.25
B) 37
C) 45
D) 47.94
E) 39.53
Answer: E
Page Ref: 12-15
Topic: Economic Production Quantity: Determining When to Produce
Difficulty: Moderate
AACSB: Analytic Skills
Document Summary
The bakery uses 5000 bags of sugar each year. Carrying costs are per bag per year. Ordering costs are estimated at 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: refer to the information above. What is the optimal eoq: 200 bags, 5000 bags, 2500 bags, 100 bags, 50 bags. What is the maximum inventory held in a given eoq cycle: 5000 bags, 200 bags, 50, 100 bags, 15 bags. What is the minimum inventory held in a given eoq cycle: 0 bags, 2500 bags, 50 bags, 25 bags, 100 bags. What is the total cost of ordering and carrying sugar: , , , , . What is the optimal number of orders per year: 200, 100, 500, 300, 400.
