Imagine that you are a contestant on a popular television quiz show, Cash for Questions. You are thrilled that the category is Corporate Cost of Capital, because you just learned about the concepts and calculations used in the management of a firms inventory in your corporate finance class.

There are five questions in this category, and the host, Jason Jack, will give you the answer to each question in each of the following boxes. Remember, you must phrase your response in the form of a question and type in the correct entry. Good luck!

Disclaimer: You wont actually receive any money if you answer the questions correctly.

Question 1: $100

This practice involves purchasing components rather than producing them in house.

Define .

Question 2: $200

This method of accounting for inventory bases the value of a firms cost of goods sold on a weighted average unit cost of the goods in inventory.

Define .

Question 3: $300

Everything else being equal and in the absence of a safety stock, when orders are placed for quantities less than those indicated using the Economic Ordering Quantity model, these costs will be the greater of the two major inventory costs.

Define .

Question 4: $400

The costs associated with warehousing a firms raw-materials, work-in-progress, and finished-goods inventories and the associated insurance and obsolescence costs are examples of this major type of inventory cost.

Defineordering costs .

Question 5: $500

At this inventory level, new items must be ordered.

Define .

You are now in the final round of the game. This is the Show-Off Round. Given three statements or phrases, identify the question that the statements answer. Identifying the correct question will earn you $1,000.

Show-Off Round: $1,000

1. The costs associated with carrying an inventory, expressed as a percentage of the items cost

2. The number of units held as safety stock

3. The sale price or cost of the item purchased

What are the three factors that determine the carrying cost of an items safety stock?

What are the three factors that determine the carrying cost of an items EOQ-based order size?

What are the three factors that determine the ordering cost of an items safety stock?