The Materials Manager for a Billiard Ball Maker Must Periodically

question 122

Multiple Choice

The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If order size was 1,000 kilograms of resin, what would be the length of an order cycle?

• A) .05 days
• B) 4 days
• C) 16 days
• D) 20 days
• E) 50 days

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Definitions:

Growing Annuity

A growing annuity is a type of annuity payment that increases at a constant rate over time, often used to model increasing cash flows like rent or royalties.

Fixed Period

A specified duration of time during which certain conditions or rules are applied, often in financial contracts or investment terms.

Growing Annual Cash Flows

Refers to the increment in cash inflows that a business experiences annually, often attributed to factors like increased sales or cost-efficiency measures.

Growing Perpetuity

A stream of cash flows that continue indefinitely and grow at a constant rate.