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:…show more content… A) insurance
B) spoilage
C) obsolescence
D) theft
E) inspection
Answer: E
Page Ref: 12-4
Topic: Inventory Control Decisions
Difficulty: Moderate
15) The Z-value for a desired service level of 0.95 is ________.
A) 1.28
B) 1.65
C) 1.96
D) 2.33
E) 2.58
Answer: B
Page Ref: 12-25
Topic: Use of Safety Stock
Difficulty: Moderate
AACSB: Analytic Skills
16) If the standard deviation of demand is 10 and the desired service level is 0.90, then what is the safety stock?
A) 9
B) 10
C) 12.8
D) 16.5
E) 23.3
Answer: C
Page Ref: 12-25
Topic: Use of Safety Stock
Difficulty: Moderate
AACSB: Analytic Skills
17) Processing and inspecting incoming inventory are considered ordering cost factors.
Answer: TRUE
Page Ref: 12-4
Topic: Inventory Control Decisions
Difficulty: Moderate
18) The optimal Economic Order Quantity (EOQ) minimizes the sum of ordering and purchasing costs.
Answer: FALSE
Page Ref: 12-5
Topic: Economic Order Quantity: Determining How Much to Order
Difficulty: Moderate
19) Spoilage is considered to be a part of carrying cost.
Answer: TRUE
Page Ref: 12-4
Topic: Inventory Control Decisions
Difficulty: Moderate
20) The Economic Order Quantity (EOQ) formula assumes that all input data are known with