Scenario C.1 Jerry Allison Is in Charge of Production for a Small

question 18

Multiple Choice

Scenario C.1
Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year.
-Use the information in Scenario C.1. If Jerry chooses to produce the batch size suggested by the economic production lot size (ELS) model, what is the annual cost?

• A) less than or equal to $900
• B) greater than $900 but less than or equal to $950
• C) greater than $950 but less than or equal to $1,000
• D) greater than $1,000

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Definitions:

Assets

Resources owned by a company or individual that have economic value and can be used to meet debts, commitments, or legacies.

Accounts Payable

This is the amount of money that a company owes to its suppliers or creditors as a result of purchasing goods or services on credit.

Retention Ratio

The segment of net earnings kept by a corporation instead of being paid out to its shareholders in the form of dividends.

Net Income

It represents the total earnings of a company after subtracting all expenses, taxes, and losses from the total revenue.