Lets Play . . . Cash for Questions!

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, Caleb Cash, 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

Under this type of system, inventory items are delivered to the manufacturer only hours before they are used, which reduces the need to carry large stocks of inventory.

Define .

Question 2: $200

This method of accounting for inventory attaches a unique cost to each item in inventory and is useful for high-cost, slow-selling items.

Define .

Question 3: $300

Everything else being equal and in the absence of a safety stock, when orders are placed for quantities greater 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

According to the Economic Ordering Quantity model, these costs are calculated by multiplying the number of orders placed per year by the fixed costs incurred per order.

Define .

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.

6/ Show-Off Round: $1,000

1. The length of time needed to deliver an order

2. The size of the items safety stock

3. The number of units used during the delivery period

What are the factors that affect an items order point?

What are the factors that directly affect an items total inventory costs?

What are the factors that affect an items Economic Ordering Quantity?