The Annual Demand for a Product Has Been Projected at 2,000

question 70

Multiple Choice

The annual demand for a product has been projected at 2,000 units.This demand is assumed to be constant throughout the year.The ordering cost is $20 per order,and the holding cost is 20 percent of the purchase cost.The purchase cost is $40 per unit.There are 250 working days per year.Currently,the company is ordering 500 units each time an order is placed.Assuming the company uses a safety stock of 20 units resulting in a reorder point of 60 units,what is the expected lead-time for delivery?

• A)4 days
• B)5 days
• C)6 days
• D)7 days
• E)None of the above

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Definitions:

Factory Labor

Direct work performed in the factory that is actively involved in the manufacturing process of goods.

General Factory Use

Expenses related to the operation of a manufacturing plant or factory, which are not directly tied to individual units of production.

Factory Overhead Costs

All indirect costs associated with manufacturing, excluding direct materials and direct labor costs, such as utilities, depreciation, and supervisory salaries.

Direct Labor Hours

The total hours of labor directly involved in manufacturing a product or providing a service, often used for costing purposes.