The Operations Manager for Shadyside Savings & Loan Orders Cash

question 15

Multiple Choice

The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the dollar value of the average inventory level?

• A)$3,000
• B)$6,000
• C)$12,500
• D)$300,000
• E)$600,000

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Definitions:

Unit Selling Price

The price at which a single unit of a product is sold to customers.

Unit Variable Costs

The costs that vary directly with the volume of production or sales, such as materials and labor.

Contribution Margin Ratio

The percentage of sales revenue that exceeds variable costs, indicating the portion available to cover fixed costs and generate profit.

Operating Income

Income generated from a company's ongoing, core business operations, excluding deductions of interest and taxes.