Inventory Management Quiz

A company has the following details: - Annual demand = 12,000 units - Ordering cost = $20 per order - Carrying cost = $1 per unit per year What is the Economic Order Quantity (EOQ)?

• 250 units

• 346 units

• 500 units

• 400 units

Answer explanation

The EOQ formula is sqrt((2 * Demand * Ordering Cost) / Carrying Cost). Plugging in the values: sqrt((2 * 12000 * 20) / 1) = 346 units. Thus, the correct answer is 346 units.

A company has the following details: - Annual demand = 12,000 units - Ordering cost = $20 per order If the company places an order of 300 units each time, how many orders will it place per year?

• 40 orders

• 35 orders

• 45 orders

• 44 orders

Answer explanation

To find the number of orders per year, divide the annual demand (12,000 units) by the order size (300 units). 12,000 / 300 = 40 orders. Thus, the company will place 40 orders per year.

A company has the following details: - Annual demand = 12,000 units - Ordering cost = $20 per order If the company places an order of 300 units each time, how many orders will it place per year? Given that the cost per order is $20, what is the total ordering cost per year?

• $680

• $850

• $800

• $700

Answer explanation

To find the number of orders per year, divide annual demand (12,000) by order size (300), resulting in 40 orders. Total ordering cost is 40 orders x $20 per order = $800, which is the correct answer.

What is the average inventory, assuming an Economic Order Quantity (EOQ) of 346 units?

• 173 units

• 200 units

• 180 units

• 150 units

Answer explanation

The average inventory is calculated as half of the EOQ. Therefore, with an EOQ of 346 units, the average inventory is 346 / 2 = 173 units, making 173 units the correct answer.

What is the annual carrying cost, assuming an average inventory of 173 units and a carrying cost of $1 per unit?

• $173

• $200

• $180

• $150

Answer explanation

The annual carrying cost is calculated by multiplying the average inventory (173 units) by the carrying cost per unit ($1). Thus, 173 units x $1/unit = $173, making $173 the correct answer.

The company also keeps safety stock of 100 units. What is the annual cost of holding this safety stock, given a carrying cost of $1 per unit?

• $100

• $120

• $150

• $200

Answer explanation

The annual cost of holding safety stock is calculated by multiplying the number of units (100) by the carrying cost per unit ($1). Thus, 100 units x $1/unit = $100, making the correct answer $100.

What is the total ordering cost for the company, if it places 34 orders per year at a cost of $20 per order?

• $680

• $693.50

• $700

• $600

Answer explanation

The total ordering cost is calculated by multiplying the number of orders (34) by the cost per order ($20). Thus, 34 x 20 = $680, which is the correct answer.