Question 3

When a specified level of safety stock is carried for an item in inventory, the average inventory level for that item

Group of answer choices

decreased by the amount of the safety stock.

is one-half the level of the safety stock.

increases by one-half the amount of the safety stock.

increases by the amount of the safety stock.

Question 4

Which of the following statements is most consistent with efficient inventory management? The firm has a

Group of answer choices

relatively high current ratio.

below-average total assets turnover ratio.

below-average inventory turnover ratio.

low incidence of production schedule disruptions.

Question 5

In the EOQ model, if carrying costs decrease while all other costs remain unchanged, the number of orders placed would be expected to

Group of answer choices

remain unchanged.

increase.

decrease.

change without regard to carrying costs.

Question 6

Use the following information for the next two questions.

You are applying for a job at a major door and window retailer. The manager would like to evaluate your skills in the area of inventory management and he provides you with the following information:

• Annual demand is 450 windows (an average of 9 every week).
• Average cost of each window is P250.
• Purchase order lead time is 21 days.
• Relevant handling costs are P5,000 per year.
• Relevant ordering costs are P150 per order.
• Shareholders expected return is 8%.
• Shipments are FOB destination.

What is the economic order quantity (EOQ)?

Group of answer choices

72

66

54

45

Question 7

What are the total relevant costs, assuming the order size is 75 units and the relevant carrying costs are P50?

Group of answer choices

P2,673

P1,775

P1,500

P2,775