Scenario 9.12 Demand = 100,000 Units/year

question 81

Multiple Choice

Scenario 9.12
Demand = 100,000 units/year
Number of days per year = 250 weeks
Standard deviation of weekly demand = 50 units
Average lead time = 5 days
Standard deviation of lead time: 2 days
Cycle-service level = 99%
A continuous review system is used to control inventory.
-Use the information in Scenario 9.12. If the firm decides to reduce its cycle-service level to 95%, what is the new reorder point if all other parameters remain the same for this product?

• A) greater than 4,500 units
• B) greater than 3,500 units but less than or equal to 4,500 units
• C) greater than 2,500 units but less than or equal to 3,500 units
• D) greater than 1,500 units but less than or equal to 2,500 units
• E) greater than 0 but less than or equal to 1,500 units

Comprehend the conceptual superiority of the NPV method over the IRR method, especially for mutually exclusive investments.

Realize the rationale behind the popular use of the payback period method amidst financial pressures.

Understand the broader considerations in capital budgeting, including compliance, managerial discretion, and the irrelevance of financing impact on investment rules.

Understand the components and the size of federal outlays, including Social Security, Medicare, national defense, and interest payments.

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Definitions:

Final Goods

Products that are completed and ready for sale and consumption, as opposed to intermediate goods used in the production of another product.

Consumer Price Index

An index measuring the change in the price level of a basket of consumer goods and services purchased by households.

Market Basket

A selected set of goods and services used to track changes in prices and measure inflation over time.

Widely Used

A term denoting something that is utilized by a large number of people or entities across various contexts.