Operating Management

1. Carrying costs include the following items, except:
a. labor
b. record keeping
c. rent
*d. all the above

2. Which of the following is not a cost associated with carrying inventory?
*a. price discounts
b. carrying costs
c. ordering costs
d. shortage costs

3. The level of inventory at which a new order should be placed is known as the
a. lead time
b. replenishment quantity
*c. reorder point
d. service level

4. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. If the cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00, then the optimal order quantity (EOQ) for napkins would be
a. 62,500 boxes
b. 10,000 boxes
*c. 5,000 boxes
d. 2,500 boxes

Calculate the EOQ, Q* =sqrt [(2*D*CO )/CC] = sqrt [(2*62500*200)/1] = 5000

5. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the optimal (EOQ) number of boxes each time an order is placed, then the number of orders placed during the year would be
*a. 12.5
b. 15
c. 20.25
d. 25

# of orders = D/Q* = 62500/5000 = 12.5

6. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate over the 365 days that it is open. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the optimal order size then the time between orders (order cycle) would be
a. 125 days
b. 75.3 days
c. 32.8 days
*d. 29.2 days
Time between orders = # of working days/# of orders = 365/12.5 = 29.2 days

7. A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the... [continues]

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