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1. The parameters of the economic order quantity (EOQ) model include all of the following except: A. order quantity. B. demand rate. C. holding cost per unit per year. D. ordering cost per order.
2. Company A sells 600 bottles of a dietary supplement per week at $100 per bottle. The supplement is ordered from a supplier who charges Company A $40 per order and $50 per bottle. Company A’s annual holding cost percentage is 30%. Assume Company A operates 50 weeks in a year. What is the economic order quantity? A. 200 B. 400 C. 500 D. 800
3. Store A purchases cases of fertilizer for its lawn-care business from a supplier who charges Store A $30 per order and $50 per case. Each case consists of five bags of fertilizer. Store A needs 2000 bags of fertilizer a year. Store A’s annual holding costs are 30%. If Store A’s order quantity is 40 cases, what is its average inventory level? A. 89 B. 45 C. 40 D. 20
4. A critical ratio of 0.8 means there is an 80% chance that demand is less than or equal to the optimal order quantity. True or False?
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An analysis of the holding costs, including the appropriate annual holding cost rate.
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