A Product Has Demand of 4000 Units Per Year

question 3

Multiple Choice

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

• A) $400
• B) $800
• C) $1200
• D) Zero; this is a class C item.
• E) Cannot be determined because unit price is not known.

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Definitions:

One-sample Z Statistic

A statistical measure used to determine how many standard deviations a single sample mean deviates from the population mean, assuming the population variance is known.

One-sample T Statistic

A statistical measure used to compare the mean of a single sample to a known or hypothesized population mean.

Null Hypothesis

In statistical hypothesis testing, a statement that there is no effect or no difference, and any observed deviation from this is due to sampling or experimental error.

Significance Level

The probability of rejecting the null hypothesis in a statistical test when it is actually true, commonly denoted by alpha.