Exhibit 3.5 The Following Questions Are Based on This Problem and Accompanying

question 39

Multiple Choice

Exhibit 3.5
The following questions are based on this problem and accompanying Excel windows.
A company is planning production for the next 4 quarters. They want to minimize the cost of production. The production cost is stable but demand and production capacity vary from quarter to quarter. The maximum amount of inventory which can be held is 12,000 units and management wants to keep at least 3,000 units on hand. Quarterly inventory holding cost is 3% of the cost of production. The company estimates the number of units carried in inventory each month by averaging the beginning and ending inventory for each month. There are currently 5,000 units in inventory. The company wants to produce at no less than one half of its maximum capacity in any quarter.
-Refer to Exhibit 3.5. What formula should be entered in cell C6 in the accompanying Excel spreadsheet to compute ending inventory?

• A) =C3-C4+C5
• B) =C3+C4-C5
• C) =C3-(C4-C5)
• D) =C5-C4-C3

---

Definitions:

Rank Order

A method of arranging data points based on their value, from highest to lowest or vice versa.

Measurement

The process or the result of determining the size, length, or amount of something, usually according to a set of standard units.

Nominal Scale

A classification system where numerical or non-numerical data are categorized without a natural order or ranking.

Measurement

The process of quantifying the characteristics of phenomena observed, usually by assigning numbers in a valid and reliable way.