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

question 51

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 C18 in the accompanying Excel spreadsheet to compute the quarterly carrying costs?

• A) =C15*C3+C6
• B) =C15*(C3+C6)
• C) =C15*C3/2
• D) =C15*(C3+C6)/2

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Definitions:

Net Income

The company's net income, calculated by subtracting all costs and taxes from its total earnings.

Original Capital Investment

The initial sum of money invested in a business venture, project, or asset, used to start or acquire the investment.

Salary Allowances

Additional benefits or compensations provided to employees on top of their regular salary, which may include housing, transport, or medical allowances.

Liquidation

The process of closing a business and distributing its assets to claimants, often done when a company is insolvent.