5. If annual demand is 24,000 units, orders are placed in quantities of 200 units at a time, and the cost to place an order is $60, what is the annual ordering cost?

a. 7,200

b. 80,000

c. 60

d. 120

e. 4,800,000

6. In a periodic review inventory model, the order quantity is calculated as:

a. the optimal order quantity given by the economic order quantity formula

b. in a periodic review inventory model, the order quantity is calculated

c. expected demand during lead time + safety stock

d. the target order-up to inventory level - current inventory on hand and on order

e. the maximum target inventory level - the minimum target inventory

7. A cupcake store owner sells all of her cupcakes toward the end of most days because she always orders fewer cupcakes than the average daily demand. Assume that this is a rational choice rather than a mistake. Which of the following is the correct explanation for this strategy?

a. the cost of underage must be high

b. the cost of overage is zero

c. the cost of underage must be greater than the cost of overage

d. the cost of coverage must be greater than the cost of underage

(Hint: Assume that cupcakes are perishable by the next day)