Frontenac Corporation Has Just Developed a New On-Line Ordering System

question 14

Multiple Choice

Frontenac Corporation has just developed a new on-line ordering system with their primary supplier.They expect the new system to reduce their average number of days of inventory on hand from 42 days to 22 days.If their cost of goods sold was $642,000 last year and is expected to be about the same this year, how much smaller should their investment in inventory be this year?

• A)$15,285
• B)$32,100
• C)$35,178
• D)$38,695

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Definitions:

Framing

Decisions are affected by how choices are described, for example, whether uncertainty is posed as potential gains from a low baseline level, or as losses from a higher baseline value.

Potential Gains

The anticipated positive returns from an investment or venture, before accounting for expenses or losses.

Potential Losses

Refers to the maximum amount of money that can be lost in an investment or a portfolio of investments.

Information Processing Errors

Mistakes made in evaluating, interpreting, or remembering information, often affecting decision-making and judgments.