The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four (4) days.
1. At what point should resin be reordered?
A. 0 kilograms remaining
B. 50 kilograms remaining
C. 200 kilograms remaining
D. 400 kilograms remaining
E. 500 kilograms remaining
2. If order size was 1,000 kilograms of resin, what would be the length of an order cycle?
A. 0.05 days
B. 4 days
C. 16 days
D. 20 days
E. 50 days
3. If the order size was 1,000 kilograms of resin, what would be the average inventory level?
A. 50 kilograms
B. 200 kilograms
C. 500 kilograms
D. 800 kilograms
E. 1,000 kilograms
4. If the order size was 1,000 kilograms of resin, what would be the daily total inventory costs, EXCLUDING the cost of the resin?
A. $5
B. $10
C. $20
D. $25
E. $40