14-19 The Talbot Company uses electrical assemblies to produce an aray of smaill

Question

14-19 The Talbot Company uses electrical assemblies to produce an aray of smaill appliances One of its high cost /high volume assemblies, the X0-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $$0, and the holding cost for each assembly is S20 per year. The compamy operates 250 days per year 14) What is the economic order quantity for the XO-01? A) less than or equal to 100 units B) greater than 100 units but less than or equal to 180 units C) greater than 180 units but less than or equal to 250 units D) greater than 250 units 15) What is the annual inventory holding cost if Talbot orders using the EOQ quantity? A) less than oe equal to $1,500 B) greater than $1,500 but less than or equal to S$4,000 C) greater than $4,000 but less than or equal to S6,500 D) greater than S6,500 16) What is the annual ordering cost if Talbot orders using the EOQ quantity? A)less than or equal to $1,000 B) greater than $1,000 but less than or equal to $2,500 C) greater than $2,500 but less than or equal to $4,000 D) greater than $4,000 17) What is the total annual holding and ordering costs if Talbot orders using the EOQ quantity? A) greater than $7,000 B) greater than $5,000 but less than or equal to $7,000 C) greater than $2,500 but less than or equal to 35,000 D) less than or equal to $2,500 18) What is the cycle length (time between orders) when orders are placed using the EOQ quantity? A) less than 5 days B) greater than 5 days but less than or equal to 10 days C) greater than 10 days but less than or equal to 15 days D) greater than 15 days 19) How many times per year must Talbot order the XO-01 when orders are placed using the EOQ quantity? A) less than 10 times per year B) greater than 10 times but less than or equal to 20 times per year C) greater than 20 times but less than or equal to 30 times per year D) greater than 30 times per year

Explanation / Answer

14.

C

Working note:

EOQ = (2*8000*50/20)^.5 = 200 units

So, EOQ is between 180 and 250 units.

15.

B

Working note:

Inventory holding cost = (EOQ/2)*20 = (200/2)*20 = $2000

So, inventory holding cost is between $1500 and $4000.

16.

B

Working note:

Annual ordering cost = (8000/200)*50 = $2000

17.

C

Working note:

Total annual ordering & holding cost = 2000 + 2000 = $4000

So, it is greater than $2500, but less than $5000.

18.

B

Working note:

Cycle time = 250/(8000/200) = 6.25 days

19.

D.

Working note:

No. of times of order = 8000/200 = 40 times

So, it is greater than 30 times per year.

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