1. A decrease in the price of a raw material could result in a(n)

a. Increase in the lead time.

b. Increase in the EOQ.

c. Decrease in the order point.

d. Increase in the setup costs.

2. All other factors equal, a decrease in the order quantity will

a. Decrease the annual carrying costs.

b. Decrease the annual ordering costs.

c. Increase the lead time.

d. Reduce the safety stock.

Douglas Corporation operates its factory 300 days per year. Its annual consumption of Material Y is 1,200,00 gallon safety carries a 10,000 gallon safety stock of Material Y and its lead time is 12 business days.

3. Refer to Douglas Corporation. What is the order point for Material Y?

a. 10,000 gallons

b. 38,000 gallons

c. 48,000 gallons

d. 58,000 gallons

4. Refer to Douglas Corporation. If the EOQ for Material Y is 30,000 gallons, and the carrying cost per gallon per year is 5.25, what is the total annual carrying cost for Material Y?

a. $3,750

b $7,500

c. $6,250

d. $10,000