Purchasing Materials 105 MULTIPLE CHOICES - COMPUTATIONAL 1. A company orders 10,000 units (a one-year supply) of material X at one time. Material X costs Pl per unit, and order costs amount to P500 each time an order is placed. The costs to carry Material X in inventory amount to 20% of the materials cost. For an entire year, the inventory carrying costs and order costs are: a. P1,500 b. P2,000 c. P 500 d. P1,000 2. There are 1,000 trolls in stock, and 1,500 are due in from orders that were placed previously. The company sells Trolls at the rate of 100 per day and finds that it takes an average of 20 days for an order to be received. Because usage and lead times are known with certainty and because the company has determined that an order must be placed now, the desired safety stock quantity must be equal to: a. 500 units b. 1,000 units C. 2,500 units d. 100 units 3. Jess Company has a plant that manufactures transistor radios. One component is an XT transistor. Expected demand is for 5,200 of these transistors in March 2018. Jess estimates the ordering cost per stock is P5. purchase order to be P250. The carrying cost for one unit of XT in What is the EOQ for the XT transistor? 8. 721 b. 521 c. 520 d. 720Chapter 2 4. Using the data in No. 3, what is the number of deliveries of XT in April 2018? a. 7.2 (rounded up to 8 deliveries in March 2018) b. 8.2 (rounded up to 9 deliveries in March 2018) c. 6.5 (rounded up to 7 deliveries in March 2018) d. 5.8 (rounded up to 6 deliveries in March 2018) 5. Basketball, Inc. operates a megastore featuring sports merchandise. It uses EOQ decision model to make inventory decisions. It is now considering inventory decisions for its PBA's jerseys product line. This is a highly popular item. Data for 2018 are: Expected annual demand for PBA 10,000 Ordering costs for purchase order P225 Carrying costs per year P10 per jersey Each jersey costs Basketball, Inc. P40 (12% x P40 purchase price) plus P5.20 in relevant insurance, handling, and theft-related costs. The purchasing lead time is 7 days. Basketball, Inc. is open 365 days a year. What is the EOQ? a. 671 jerseys b. 751 jerseys c. 550 jerseys d. 851 jerseys 6. Using the data in No. 5, what is the number of orders that will be placed each year? a. 15 orders b. 20 orders c. 25 orders d. 30 ordersterials 109 13. The following data relates to Bull Company's Material X: Annual usage in units 7,200 Working days per year 240 Normal lead time in working days 20 Maximum lead time in working days 45 Assuming that the units of Material X will be required evenly throughout the year, the safety stock and order point would be: Safety Stock Order Point 750 1,350 600 750 600 350 750 600 14. Venus Manufacturing Company uses 1,000 units of Chip annually in its production. Order costs consist of P10 for placing a long-distance call to make the order and P40 for delivering the order by truck to the company warehouse. Each Chip costs P100 and the carrying costs are estimated at 15.625% of the inventory cost. What is the economic order quantity for Chip? a. 80 b. 90 c. 100 d. 120 15. Using the data in No. 14, what is the total order cost? a. P625 b. P550 c. P525 d. P650 16. Using the data in No. 14, what is the carrying cost for the year? a. P625 P650 C. P550 d. P525Chapter 2 17. Pluto Company has developed the following data to assist in controlling one of its material inventory items: Economic order quantity 1,000 liters Average daily use 100 liters Maximum daily use 120 liters Working days per year 250 days Safety stock 140 liters Cost of carrying inventory P1.00 per liter per year Lead time 7 working days What is the reorder point? a. 840 liters b. 800 liters c. 900 liters d. 830 liters 18. Using the data in No. 17, what is the average inventory? a. 640 liters b. 650 liters C. 740 liters d. 700 liters 19. Using the data in No. 17, what is the maximum inventory assuming normal lead time and usage? a. 1, 140 liters b. 1,400 liters c. 1,200 liters d. 1,240 liters 20. Using the data in No. 17, what is the cost of placing one order? a. P20 b. P25 c. P30 d. P35