Question 1

Very Technical is a firm that sells computing equipment. It costs Very Technical $100 for each order of computer monitors and the variable cost of placing an order is $4 per monitor. Very Technical pays an annual holding cost of $10 per monitor. If Very Technical sells 6,000 computer monitors a year and they order 500 monitors, what is the total annual cost of the monitors?

Accepted Answer

The total annual cost includes the ordering cost, holding cost, and the cost of the monitors. Ordering cost is (6000/500) * $100 = $1,200. Holding cost is (500/2) * $10 = $2,500. The variable cost is 6000 * $4 = $24,000. Total cost = $1,200 + $2,500 + $24,000 = $27,700.

Question 2

Very Technical is a firm that sells computing equipment. It costs Very Technical $150 for each order of computer monitors and the variable cost of placing an order is $2 per monitor. Very Technical pays an annual holding cost of $8 per monitor. If Very Technical sells 4,000 computer monitors a year and they order 500 monitors, what is the total annual cost of the monitors?

Accepted Answer

The total annual cost of the monitors includes the purchase cost, ordering cost, and holding cost. The purchase cost is $150 per order of monitors, regardless of the number of monitors per order. Since Very Technical orders 500 monitors at a time and sells 4,000 a year, they will place 8 orders a year (4,000/500). The ordering cost is $2 per monitor, so for 4,000 monitors, the total ordering cost is 4,000 * $2 = $8,000. The annual holding cost is $8 per monitor, and since they order 500 monitors at a time, on average, they hold 250 monitors (half of 500, assuming steady sales throughout the year). The annual holding cost is 250 * $8 = $2,000. Adding these costs together: Purchase cost for 8 orders at $150 each is 8 * $150 = $1,200. So, the total annual cost is $1,200 (purchase) + $8,000 (ordering) + $2,000 (holding) = $11,200.

Question 3

Which of the following is an example of a variable ordering cost?

Accepted Answer

Variable ordering cost refers to costs that vary with the quantity of units ordered. Delivery cost that depends on the number of units ordered is an example of variable ordering cost.

Question 4

If managers decrease the size of the order they place, the ordering cost _____and the carrying cost _______

Accepted Answer

When managers decrease the size of the order, the ordering cost rises because they need to place orders more frequently. The carrying cost falls because they hold less inventory at any given time.

Question 5

Big Woods is a lumber firm that sells plywood sheets to local builders. If the annual holding cost of a sheet of plywood is $15 and the managers of Big Woods order 500 sheets of plywood, what is the total annual carrying costs of the inventory?

Accepted Answer

The total annual carrying costs of the inventory are calculated by multiplying the annual holding cost per unit by the number of units ordered. Therefore, $15 * 500 = $7,500. However, the correct calculation should be $15 * 500 = $7,500, indicating a mistake in my initial explanation. The correct answer based on the calculation provided should indeed be $7,500, but given the options and instructions, my initial selection was incorrect. The correct answer should be B based on the accurate calculation.

Question 6

Big Woods is a lumber firm that sells plywood sheets to local builders. If the annual holding cost of a sheet of plywood is $6 and the managers of Big Woods order 1,000 sheets of plywood, what is the total annual carrying costs of the inventory?

Accepted Answer

Total annual carrying costs = (annual holding cost per unit) x (number of units)
= $6 x 1,000 = $6,000. 
Therefore, the correct answer is option C.

Question 7

Very Technical is a firm that sells computing equipment. It costs Very Technical $125 for each order of computer monitors and the variable cost of placing an order is $10 per monitor. Very Technical pays an annual holding cost of $20 per monitor. If Very Technical sells 8,000 computer monitors a year and they order 1,000 monitors, what is the total annual cost of the monitors?

Accepted Answer

The total annual cost includes the purchase cost, ordering cost, and holding cost. Purchase cost = $125 * 8,000 = $1,000,000. Ordering cost = ($125/order) * (8,000 monitors / 1,000 monitors/order) = $1,000. Holding cost = ($20/monitor) * (1,000 monitors / 2) = $10,000. Total annual cost = $1,000,000 + $1,000 + $10,000 = $1,011,000. However, the calculation provided in the question seems to have an error in interpreting the costs, as the given options do not match the calculated total annual cost. Re-evaluating with the correct interpretation: Purchase cost is not explicitly given per monitor, but the cost to order monitors is $125 each, leading to a misunderstanding in the calculation. The correct approach is to calculate the ordering and holding costs based on the given data: Ordering cost = $10 * (8,000 / 1,000) = $80. Holding cost = $20 * (1,000 / 2) = $10,000. However, this approach also does not align with the provided options, indicating a misunderstanding in the prompt's interpretation. Given the options and the typical formula for total cost in inventory management (Total Cost = Purchase Cost + Ordering Cost + Holding Cost), and assuming the purchase cost is correctly interpreted as part of the initial $125 per monitor, the correct calculation should consider the cost per monitor, the number of orders, and the average holding cost: Total annual cost = (Cost per monitor * Quantity sold) + (Ordering cost * Number of orders) + (Holding cost * Average inventory). Without clear purchase cost per monitor beyond the initial order cost, we directly address the provided options for an educational guess based on standard inventory cost calculations.

Question 8

Very Technical is a firm that sells computing equipment. It costs Very Technical $50 for each order of computer monitors and the variable cost of placing an order is $2 per monitor. Very Technical pays an annual holding cost of $6 per monitor. If Very Technical sells 1,000 computer monitors a year and they order 25 monitors, what is the total annual cost of the monitors?

Accepted Answer

The total annual cost of the monitors is the sum of the ordering cost, the holding cost, and the variable cost. The ordering cost is $50 per order, and Very Technical places 40 orders per year (1,000 monitors / 25 monitors per order). So the ordering cost is $50 * 40 = $2,000. The holding cost is $6 per monitor, and Very Technical holds an average of 12.5 monitors (25 monitors / 2). So the holding cost is $6 * 12.5 = $75. The variable cost is $2 per monitor, and Very Technical sells 1,000 monitors per year. So the variable cost is $2 * 1,000 = $2,000. The total annual cost is $2,000 + $75 + $2,000 = $4,075.

Question 9

Big Woods is a lumber firm that sells plywood sheets to local builders. If the annual holding cost of a sheet of plywood is $8 and the managers of Big Woods order 700 sheets of plywood, what is the total annual carrying costs of the inventory?

Accepted Answer

The formula for calculating the total annual carrying cost of inventory is:
Total Annual Carrying Cost = Annual Holding Cost per Unit x Number of Units Ordered/Produced
Substituting the values given in the problem, we get:
Total Annual Carrying Cost = $8 x 700 = $5,600
Therefore, the answer is choice letter A, which is $2,800. However, this is not a valid answer as it is half of the actual cost. The correct answer is $5,600.

Question 10

If managers increase the size of the order they place, the ordering cos_____t and the carrying cost _________.

Accepted Answer

When managers increase the size of the orders they place, the ordering cost falls because fewer orders need to be placed over time. However, the carrying cost rises because holding larger quantities of inventory incurs higher storage and maintenance costs.

Question 11

Office Paper is an office supply firm. If the managers of Office Paper sell 10,000 boxes of staples a year and each order contains 1,000 boxes of staples, how many orders will the managers submit a year?

Accepted Answer

To find the number of orders, divide the total boxes sold (10,000) by the number of boxes per order (1,000). This gives 10,000 / 1,000 = 10 orders per year.

Question 12

It costs View Your World, a high- end window manufacturer, $30 for each order of windows they place. View Your World sells 3,000 windows a year and each window that is held in inventory costs $200 per year. What is the economic order quantity?

Accepted Answer

The economic order quantity formula is √((2DS)/H), where D is the demand, S is the ordering cost, and H is the holding cost. Plugging in the values, we get √((2 x 3000 x $30)/$200) = 30. Therefore, the economic order quantity is 30. Option C is the correct answer.

All other choices are incorrect as they either do not match the calculated value or are not supported by the given information.

Question 13

Office Paper is an office supply firm. If the managers of Office Paper sell 5,000 boxes of staples a year and each order contains 500 boxes of staples, how many orders will the managers submit a year?

Accepted Answer

There are 5,000 boxes of staples sold in a year, and each order contains 500 boxes of staples. So, the number of orders in a year is 5,000 / 500 = 10.

Question 14

Very Technical is a firm that sells computing equipment. It costs Very Technical $150 for each order of computer monitors and the variable cost of placing an order is $10 per monitor. If Very Technical sells 5,000 computer monitors a year and they order 250 monitors, what is the annual ordering cost of the monitors?

Accepted Answer

The annual ordering cost is calculated by dividing the total number of monitors sold per year by the number of monitors per order, and then multiplying by the cost per order. Here, it's (5000 / 250) * $150 = 20 * $150 = $3,000. However, the correct calculation for ordering cost should actually consider the number of orders per year multiplied by the cost of placing an order, which is not $150 (the cost per monitor order) but rather the variable cost of placing an order, which is $10 per monitor. The mistake in the explanation is the misinterpretation of the $150 cost, which is the cost for each order of monitors, not the cost of placing an order. The correct calculation for the annual ordering cost should involve the number of orders per year, which is the annual demand (5,000 monitors) divided by the order size (250 monitors per order), resulting in 20 orders per year. The cost of placing each order is given as $10 per monitor, which was incorrectly applied in the explanation. The correct approach to find the annual ordering cost would involve the ordering cost per order, not the cost per monitor or the variable cost per monitor. Given the information, the correct calculation was not provided in the explanation, leading to confusion. The actual calculation should focus on the cost associated with ordering, not the cost per monitor or the variable cost per monitor.

Question 15

It costs View Your World, a high- end window manufacturer, $50 for each order of windows they place. View Your World sells 2,000 windows a year and each window that is held in inventory costs $500 per year. What is the economic order quantity?

Accepted Answer

The economic order quantity (EOQ) is the optimal quantity of inventory to order at a time to minimize the total inventory costs. The EOQ is given by the formula:EOQ = sqrt((2*D*O)/H)where:D = annual demandO = ordering costH = holding costIn this case, D = 2,000 windows, O = $50, and H = $500. Plugging these values into the formula, we get:EOQ = sqrt((2*2,000*$50)/$500) = 20Therefore, the economic order quantity is 20 windows.

Question 16

Very Technical is a firm that sells computing equipment. It costs Very Technical $50 for each order of computer monitors and the variable cost of placing an order is $2 per monitor. If Very Technical sells 1,000 computer monitors a year and they order 25 monitors, what is the annual ordering cost of the monitors?

Accepted Answer

The annual ordering cost can be calculated by dividing the total annual demand by the order quantity and then multiplying by the cost per order. Here, the total demand is 1,000 monitors, the order quantity is 25 monitors, and the cost per order is $50. So, the annual ordering cost = (1,000 / 25) * $50 = 40 * $50 = $2,000. However, the question also includes a variable cost of $2 per monitor, which was not accounted for in the calculation. The correct calculation for the annual ordering cost should include both the fixed cost per order and the variable cost per monitor. Since the variable cost is not dependent on how many times an order is placed but on the total number of monitors ordered annually, the initial calculation was incorrect. The correct answer should solely be based on the fixed cost associated with placing orders, which was correctly calculated as $2,000, not including the variable cost per monitor in this context. Therefore, the explanation mistakenly included an incorrect interpretation of how to calculate the annual ordering cost, focusing solely on the fixed ordering cost without correctly incorporating the variable cost per monitor, which in this context, should not alter the calculation of the annual ordering cost based on the information provided.

Question 17

Which of the following is an example of a variable ordering cost?

Accepted Answer

The answer of Which of the following is an example...

Question 18

Which of the following is an example of an ordering cost for goods held in inventory?

Accepted Answer

The cost of the paperwork necessary to pay for each order is an example of an ordering cost, as it is a direct cost associated with the process of placing an order for inventory. The other options listed (A, B, and C) are all examples of holding costs, which are costs associated with storing and maintaining inventory once it has been received.

Question 19

Very Technical is a firm that sells computing equipment. It costs Very Technical $40 for each order of computer monitors and the variable cost of placing an order is $5 per monitor. If Very Technical sells 2,000 computer monitors a year and they order 50 monitors, what is the annual ordering cost of the monitors?

Accepted Answer

First, we need to find out how many orders are placed in a year:

2,000 monitors / 50 monitors per order = 40 orders per year

Now we can use the following formula to find the total annual ordering cost:

Total Ordering Cost = Order Cost per Order * Number of Orders per Year

The order cost per order is the sum of the fixed cost and the variable cost:

Order Cost per Order = Fixed Cost + (Variable Cost per Unit * Number of Units)

Fixed Cost = $40 
Variable Cost per Unit = $5 
Number of Units = 50

Order Cost per Order = $40 + ($5 * 50) = $290

Total Ordering Cost = $290 * 40 = $11,600

Therefore, the annual ordering cost of the monitors is $116,000.

Question 20

Office Paper is an office supply firm. If the managers of Office Paper sell 1,000 boxes of staples a year and they place 5 orders a year, how many boxes of staples are in each order?

Accepted Answer

To find the number of boxes in each order, divide the total number of boxes sold in a year (1,000) by the number of orders placed in a year (5). 1,000 boxes / 5 orders = 200 boxes per order.

Quiz 12: Decisions About Production, Products, and Location

Which of the following is an example of a variable ordering cost?

If managers decrease the size of the order they place, the ordering cost _and the carrying cost ___

Big Woods is a lumber firm that sells plywood sheets to local builders. If the annual holding cost of a sheet of plywood is $15 and the managers of Big Woods order 500 sheets of plywood, what is the total annual carrying costs of the inventory?

Big Woods is a lumber firm that sells plywood sheets to local builders. If the annual holding cost of a sheet of plywood is $6 and the managers of Big Woods order 1,000 sheets of plywood, what is the total annual carrying costs of the inventory?

Big Woods is a lumber firm that sells plywood sheets to local builders. If the annual holding cost of a sheet of plywood is $8 and the managers of Big Woods order 700 sheets of plywood, what is the total annual carrying costs of the inventory?

If managers increase the size of the order they place, the ordering cos_t and the carrying cost _____.

Office Paper is an office supply firm. If the managers of Office Paper sell 10,000 boxes of staples a year and each order contains 1,000 boxes of staples, how many orders will the managers submit a year?

It costs View Your World, a high- end window manufacturer, $30 for each order of windows they place. View Your World sells 3,000 windows a year and each window that is held in inventory costs $200 per year. What is the economic order quantity?

Office Paper is an office supply firm. If the managers of Office Paper sell 5,000 boxes of staples a year and each order contains 500 boxes of staples, how many orders will the managers submit a year?

It costs View Your World, a high- end window manufacturer, $50 for each order of windows they place. View Your World sells 2,000 windows a year and each window that is held in inventory costs $500 per year. What is the economic order quantity?

Which of the following is an example of a variable ordering cost?

Which of the following is an example of an ordering cost for goods held in inventory?

Office Paper is an office supply firm. If the managers of Office Paper sell 1,000 boxes of staples a year and they place 5 orders a year, how many boxes of staples are in each order?