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

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

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