Economic Order Quantity

Economic Order Quantity

by Shauna-Kay Herah

Multiple Choice

What is EOQ?

• Economics Order Quality

• Economics Output Order

• Economics Order Quantity

• Ergonomics Order Quantity

Multiple Choice

The ideal order quantity a company should purchase for its inventory given a cost set of production, demand rate, and other variables is known as:

• Reorder point

• Economic order quantity

• Anticipation stock

• Inventory control

Multiple Choice

This includes warehousing costs such as rent, utilities and salaries, financial costs such as opportunity cost, and inventory costs related to shrinkage (leakage) and insurance

• purchasing cost

• ordering cost

• stockout cost

• carrying cost

Multiple Choice

The expenses incurred to create and process an order to a supplier.

• purchasing costs

• ordering costs

• stockout costs

• carrying costs

​Formula for EOQ

Multiple Choice

The Ramen Company requires that 80,000 units of product “H” for the year. The units will be used evenly throughout the year. It costs $60 to place an order. Its carrying cost is $15 per unit. Calculate the EOQ.

• 800 UNITS

• 1000 UNITS

• 300 UNITS

• 850 UNITS

Multiple Choice

A firm estimates that its annual carrying cost for material ABC is $.30 per lb, demand is 50 000 lbs and ordering costs are $100 per order.

Calculate the EOQ to the nearest pound.

• 6000 UNITS

• 5774 UNITS

• 1225 UNITS

• 5700 UNITS

Multiple Choice

Kenya’s Company has an annual demand of 5000 units. The company carrying cost per unit is $2 and the cost to place an order is $200.

Calculate the EOQ.

• 435 UNITS

• 659 UNITS

• 500 UNITS

• 1000 UNITS

Multiple Choice

Reorder level determines how low inventory should be before reordering occurs.

• TRUE

• FALSE

Multiple Choice

The purchase-order lead time is the ________.

• time between placing an order and its delivery

• time between receiving a customer order and producing the products

• time between receiving a customer order and delivering the items

• time required to correct errors in the defective products

Multiple Choice

Buffer stock:

• Goods kept in store to cover seasonal
  demand e.g. Christmas sale
• b Goods kept in store to cover unforeseen
  shortages or fluctuations in demand

Multiple Choice

The maximum order level is:

• The amount of inventory that the business should not fall below

• The amount of inventory that the business should not rise above

• The time that it will take for the stock to be delivered to the business

• The maximum amount of stock that the customer is allowed to order

Fill in the Blanks

▫Calculate the EOQ

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Calculate the annual ordering costs

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Calculate the annual carrying costs

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▫What is the re-order point?