Exhibit 12.3 The Following Questions Use the Information Below

question 23

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.
-The average demand is 4.45 cases per day. Using the information in Exhibit 12.3, what formula should go in cell H4 to determine the average lost sales?

• A) =H3*4.45*10*30
• B) =(1-H3)*4.45*10
• C) =(1-H3)*4.45*30
• D) =(1-H3)*4.45*10*30

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Definitions:

Building Account

An account used to record the costs associated with the construction or purchase of a building over time, which may include materials, labor, and overhead.

Land Purchased

The act of buying land, which is considered a fixed asset and is recorded on the balance sheet at cost, without depreciation.

Intangible Asset

An asset that lacks physical substance, such as patents, trademarks, and goodwill, and provides economic benefits to its owner.

Physical Existence

The actual, tangible presence of items or assets, often verified during inventory or asset audits.