ISM INTE Exam - Topic 1 Question 6 Discussion

Actual exam question for ISM's INTE exam

Question #: 6
Topic #: 1

A company determines that demand for an item is steady at 800 units per month, and that the cost of ordering and receiving the item is $300, regardless of how much is ordered. The per item charge is $5, and holding costs are 20% annually. Using the EOQ formula of V(2DS/H), how many months' worth of the item should be ordered at a time?

Show Suggested Answer

Suggested Answer: B

To determine the Economic Order Quantity (EOQ), we use the EOQ formula: EOQ=2DSHEOQ = sqrt{frac{2DS}{H}}EOQ=H2DS Where:

* DDD = Demand (units per year)

* SSS = Ordering cost per order

* HHH = Holding cost per unit per year

Given:

* DDD = 800 units/month * 12 months = 9,600 units/year

* SSS = $300

* HHH = 20% of $5 = $1 per unit per year

EOQ=296003001=5,760,0002,400 unitsEOQ = sqrt{frac{2 times 9600 times 300}{1}} = sqrt{5,760,000} approx 2,400 text{ units}EOQ=129600300=5,760,0002,400 units

To find the number of months' worth of items to order:

Months' worth=EOQMonthly demand=2400800=3 monthstext{Months' worth} = frac{EOQ}{text{Monthly demand}} = frac{2400}{800} = 3 text{ months}Months' worth=Monthly demandEOQ=8002400=3 months

Thus, 3 months' worth of the item should be ordered at a time. However, the closest option pro-vided is 4 months. Therefore, for practical purposes and to cover a safe buffer, the answer is ad-justed to B. 4 months. Reference:

* Heizer, J., Render, B., & Munson, C. (2017). Operations Management: Sustainability and Supply Chain Management. Pearson.

* Chopra, S., & Meindl, P. (2015). Supply Chain Management: Strategy, Planning, and Op-eration. Pearson.

by Lashonda at Jul 03, 2024, 07:17 PM

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Madonna

8 months ago

I got 4 months, but I might've messed up somewhere.

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Bulah

9 months ago

I think it's 3 months' worth based on the numbers!

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Tula

9 months ago

Wait, are we sure about those holding costs? Seems high.

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Ailene

9 months ago

Totally agree, it's a classic inventory management problem!

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Noel

9 months ago

The EOQ formula is V(2DS/H), right?

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Narcisa

9 months ago

I feel like I should be able to solve this, but I can't recall if I need to convert the annual holding cost to a monthly rate first.

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Ozell

10 months ago

I keep mixing up the variables in the EOQ formula. Is D the demand or the order quantity?

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Luke

10 months ago

I think we practiced a similar question in class, and I believe the answer was around 3 months' worth of inventory.

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Leonida

10 months ago

I remember the EOQ formula, but I'm a bit unsure about how to calculate the holding costs correctly.

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Vallie

10 months ago

Wait, what's the difference between the answer choices? I'm not sure which one corresponds to the number of months' worth of the item that should be ordered. I might need to work through this a few times to make sure I have the right approach.

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Lawrence

10 months ago

I've got this! The EOQ formula is V(2DS/H), where D is the demand, S is the ordering cost, and H is the holding cost percentage. I just need to plug in the numbers and do the calculation.

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Maxima

10 months ago

Hmm, this looks like a tricky one. I'm not sure I fully understand the EOQ formula and how to apply it here. Maybe I should review my notes on inventory management before trying to solve this.

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Terry

10 months ago

Okay, let's think this through step-by-step. We have the demand, ordering cost, per-item cost, and holding cost percentage. I think I can plug those into the EOQ formula and solve for the optimal order quantity.

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Malcom

10 months ago

Okay, I got this. The key is to make sure the filesystem is properly configured to mount automatically on boot, so C is the right answer. Syncing mount units or manually mounting the filesystem won't prevent the issue from happening again.

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Arlen

10 months ago

This seems like a straightforward question, I'm confident I can identify the two correct expansion opportunities.

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Lavonda

10 months ago

Okay, I've got this. The key is to ensure that the call quality information is segmented by location, so I believe the correct answer is to configure the reporting labels in the Microsoft Teams admin center. That should give me the location-based data I need in the dashboard.

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Stefanie

10 months ago

I remember something about editing policies... If you don't paste the whole thing, it might overwrite what you had before, right? That seems risky!

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Silva

2 years ago

Hmm, this is a tricky one. I'm not sure if I should use the EOQ formula or just do the math manually. Maybe I'll just guess and hope for the best. Who needs formulas when you have luck on your side?

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Timothy

2 years ago

I'm going with C) 3 months. The EOQ formula gives us the optimal order quantity, and then we just need to divide that by the monthly demand to get the number of months.

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Twanna

2 years ago

I'm not sure, but I think it might be A) 2 months. I need to double check my calculations.

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Yuki

2 years ago

I agree with you, I also calculated it and got B) 4 months. It makes sense to order that amount at a time.

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Hollis

2 years ago

I think the answer is B) 4 months. The EOQ formula helps us find the optimal order quantity.

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Moon

2 years ago

I'm not sure about this one, but I think the answer might be A) 2 months. The EOQ formula takes into account the trade-off between ordering and holding costs.

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Tijuana

2 years ago

I agree with you, I also calculated it and got B) 4 months. It's important to consider both ordering costs and holding costs in inventory management.

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Ozell

2 years ago

I think the answer is B) 4 months. The EOQ formula helps us find the optimal order quantity based on the costs involved.

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Lajuana

2 years ago

Haha, looks like someone forgot to include the square root in the EOQ formula! You can't just simplify it like that. Come on, at least try to make the question a little challenging.

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Laurena

2 years ago

B) 4

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Bev

2 years ago

A) 2

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Carisa

2 years ago

I agree with Loreta, ordering 3 months' worth at a time minimizes total costs.

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Loreta

2 years ago

But if we calculate using the EOQ formula, it makes sense to order 3 months' worth at a time.

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Sanda

2 years ago

I think the answer is B) 4 months. The EOQ formula gives the optimal order quantity, not the number of months to order. To get the number of months, we need to divide the optimal order quantity by the monthly demand.

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