Table 5.2 Consider the Following Data for an Independent Demand Item Maintained

question 34

Multiple Choice

Table 5.2
Consider the following data for an independent demand item maintained by Vicki Crittenden, the proprietor of a local auto repair shop:
Weekly demand = 50 units
Ordering cost = $8/order
Holding cost = $4/order
Weeks in a year = 50
-Use the information in Table 5.2.Due to new ordering procedures initiated by Crittenden,the ordering cost is dropping to $4/order.At the same time,the weekly demand increases to 64 units per week due to an increase in business.What effect do these changes have on the EOQ quantity for this item?

• A) The EOQ quantity remains unchanged.
• B) The EOQ quantity increases by 20 percent.
• C) The EOQ quantity decreases by 20 percent.
• D) Sufficient information is not available for answering this question.

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Definitions:

Premium on Bonds Payable

An amount by which a bond's selling price exceeds its face value, indicating that the bond was issued at a price higher than its nominal value.

Straight-Line Method

A method of calculating depreciation of an asset, where the cost of the asset is evenly divided over its useful life.

Bond Premium

The surplus of a bond's market price over its nominal or face value.

Face Amount

The total amount of money that will be paid at maturity by a financial instrument such as a bond or life insurance policy.