What Are the Minimum Total Costs of Carrying and Ordering

question 12

Multiple Choice

What are the minimum total costs of carrying and ordering inventory for a firm that sells 1,500 units with a carrying cost of $2 per unit and places orders in lots of 100?

• A)$100
• B)$200
• C)$400
• D)$430 Total carrying costs:
• = carrying cost per unit x average inventory
• = $2 x (100/2)
• = $100

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Definitions:

Heuristics

Mental shortcuts or rules of thumb that simplify decision-making processes, often leading to quick but sometimes inaccurate conclusions.

Propositions

Statements or assertions that express a judgment or opinion.

Predicate

The part of a sentence or clause containing a verb that states something about the subject.

Spreading Activation Model

A cognitive theory suggesting ideas in the brain are connected in a network, and thinking about one concept can trigger related concepts.