MGT402 - Answer to an MCQ required
Omer Chaudhry
A store sells five cases of soda each day. Ordering costs are Rs. 8 per order, and soda costs Rs. 3 per case. Orders arrive four days from the time they are placed. Daily holding costs are equal to 5% of the cost of the soda. What is the EOQ for soda?
► 4 cases
► 8 cases
► 10 cases
► 23 cases
It might be a very simple question, but I'm getting confused in Annually required units, coz if I'm not wrong, for calculating EOQ through formula, we need:
Annually required units
ordering cost (cost per order * number of orders in a year)
Regards
Fizza Dastgir
The economic order quantity can be determined by the following simple formula:
EOQ = 2xRUxOC (whole underscore)
UC x CC%
Where;
EOQ = Economic Order Quantity.
RU = Annually Required Units.
OC = Ordering Costs for one order.
UC = Inventory Unit Cost.
CC = Carrying Cost as %age of Unit Cost.
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Regards,
Fizza Dastgir
mc090405569
fazal amin
Regarding EOQ, few mcqs are given below your your study please:
1. An increase in the firm's receivable turnover ratio means that:
a) It is collecting credit sales more quickly than before
b) Cash sales have decreased
c) It has initiated more liberal credit terms
d) Inventories have increased
2. Receiving a required inventory item at the exact time needed is called:
a) ABC
b) JIT
c) FOB
d) PERT
3. EOQ is the order quantity that _________ over our planning horizon
a) Minimizes total ordering costs
b) Minimizes total carrying costs
c) Minimizes total inventory costs
d) Minimize the required safety stock
4. Which of the following is not a reason for carrying inventory?
a) To maintain independence of operations
b) To take advantage of economic purchase-order size
c) To make the system less productive
d) To meet variation in product demand
5. Counting items to ensure an order is correct, is an example of:
a) Ordering cost
b) Carrying cost
c) Stock out cost
d) Holding cost
6. Which of the following is not an assumption of the basic economic-order quantity model?
a) Annual demand is constant and known
b) Lead time is constant
c) Ordering or setup costs are constant
d) Quantity discounts are available
e) No backorders are allowed
7. In the basic fixed-order quantity model, if annual demand doubles, the effect on the Optimal Order Quantity (EOQ) is:
a) It doubles
b) It is half its previous amount
c) It is about 70% of its previous amount
d) It increases by about 40%
8. A store sells five cases of soda each day. Ordering costs are $8 per order, and soda costs $3 per case. Orders arrive four days from the time they are placed. Daily holding costs are equal to 5% of the cost of the soda. At what point should soda be ordered?
a) 0 cases remaining
b) 4 cases remaining
c) 5 cases remaining
d) 20 cases remaining
e) 40 cases remaining.
9. A store sells five cases of soda each day. Ordering costs are $8 per order, and soda costs $3 per case. Orders arrive four days from the time they are placed. Daily holding costs are equal to 5% of the cost of the soda. What is the EOQ for soda?
a) 4 cases
b) 8 cases
c) 10 cases
d) 23 cases
e) 40 cases
10. A store sells five cases of soda each day. Ordering costs are $8 per order, and soda costs $3 per case. Orders arrive four days from the time they are placed. Daily holding costs are equal to 5% of the cost of the soda. If the store were to order 20 cases of soda at a time, what would be the average inventory level?
a) 4 cases
b) 5 cases
c) 10 cases
d) 15 cases
11. In the basic EOQ model, if D= 50 per month, K=$10, and h=$10 per unit per month, EOQ is:
a) 10
b) 12
c) 25
d) 50
12. __________ provide a strong incentive to place smaller orders.
a) Selling Cost
b) Administrative costs
c) Financial cost
d) None of the given options
13. Which of the following is/are not associated with ordering costs?
a) Interest
b) Insurance,
c) Opportunity costs
d) All of the given options
14. While calculating the EOQ, carrying cost is taken as the:
a) %age of unit cost
b) %age of ordering cost
c) %age of annual required units
d) All of the given options
15. While calculating the EOQ, number of orders is calculated by:
a) Multiplying the required units with cost per order
b) Dividing required unit by ordered quantity
c) Multiplying the required units with ordered quantity
d) Multiplying the ordered quantity with cost per order
16. EOQ is a point where:
a) Ordering cost is equal to carrying cost
b) Ordering cost is higher than carrying cost
c) Ordering cost is lesser than the carrying cost
d) Total cost is maximum
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