Exhibit 12.3 The Following Questions Use the Information Below

question 54

Multiple Choice

Exhibit 12.3
The following questions use the information below.
An auto parts store wants to simulate its inventory system for engine oil. The company has collected data on the shipping time for oil and the daily demand for cases of oil. A case of oil generates a $10 profit. Customers can buy oil at any auto parts store so there are no backorders (the company loses the sale and profit) . The company orders 30 cases whenever the inventory position falls below the reorder point of 15 cases. Orders are placed at the beginning of the day and delivered at the beginning of the day so the oil is available on the arrival day. An average service level of 99% is desired. The following spreadsheets have been developed for this problem. The company has simulated 2 weeks of operation for their inventory system. The current level of on-hand inventory is 25 units and no orders are pending.
-Using the information in Exhibit 12.3, what formula should go in cell H8 to determine if an order should be placed?

• A) =IF(G8<$D$3,1,0)
• B) =IF(G8>$D$3,1,0)
• C) =IF(G8<$D$3,0,1)
• D) =IF(G8<$D$4,1,0)

---

Definitions:

Land Ownership

The legal right to possess, use, and control a designated area of land.

Life Estate

A property interest that gives a person the right to possess and use property for a time that is measured by his lifetime or that of another person.

Statute of Frauds

A legal principle that requires certain types of contracts to be in writing and signed by all parties involved, in order to be enforceable.

Express Easements

Rights granted explicitly in writing that allow one party the use of another's land for a specific, limited purpose.