SEMIFINALS 1

Question 1

l is a deterministic model that calculates the ideal order
quantity given specified demand, ordering or setup costs, and carrying costs

Answer 1

EOQ Model
(economic Order Quantity)

Question 2

is the quantity to be ordered, which minimizes the sum of Ordering costs and Carrying Costs

Answer 2

EOQ Model

Question 3

Types of ordering cost

Answer 3

Transportation
Administrative costT

Question 4

Types of Carrying cost

Answer 4

Storage costs
Interest Costs
Spoilage
Insurance Costs
Storage Costs
Taxes
Labor Costs
Obsolescence Cost
Shrinkage Cost

Question 5

is ordered every time there is an order

Answer 5

fixed quantity

Question 6

Are unaffected by the quantity ordered

Answer 6

Purchasing costs

Question 7

lead-time is known with certainty

Answer 7

Purchase Order

Question 8

is always maintained to avoid stockout

Answer 8

Adequate Inventory

Question 9

The cost of the money used to purchase the
inventory.

Answer 9

Capital Cost

Question 10

The cost of renting or owning a warehouse to store
the inventory.

Answer 10

Storage Cost

Question 11

The cost of insuring the inventory against damage
or loss.

Answer 11

Insurance Cost

Question 12

The taxes paid on the value of the inventory.

Answer 12

Taxes

Question 13

The cost of labor associated with receiving, storing, and
picking inventory.

Answer 13

Labor Cost

Question 14

The cost of inventory that becomes obsolete
or unsalable.

Answer 14

Obsolescence Cost

Question 15

The cost of inventory that is lost or stolen.

Answer 15

Shrinkage Cost

Question 16

Total Carrying cost Formula

Answer 16

Total Carrying cost = Sum ofall carrying cost/ Total Value of Inventory x 100

Question 17

Number of ways to reduce Carrying costs

Answer 17

Reduce Inventory Levels
Improve Inventory Management Practices
Negotiate Better Terms with Suppliers
Outsourcing Storage And Logistics

Question 18

Current Asset financing funds Includes:

Answer 18

Bank loans
Credit from suppliers
accrued liabilities
Long-term Debt
Common Equity

Question 19

Automatically obtained when a firm purchases goods or services on credit from a supplier.

Answer 19

Trade Credit

Question 20

credit received during the discount period.

Answer 20

Free Trade Credit

Question 21

Credit Taken in excess of free trade credit

Answer 21

Costly Trade Credit

Question 22

Represent liabilities for services that have been provided to the company but have not yet been paid for.

Answer 22

Accruals

Question 23

Customers’ advance payments or deposits for goods or services that will be delivered at some future date

Answer 23

Deferred Income

Question 24

The most desirable set of terms are those that result in the lowest cost of borrowing.

Answer 24

Commercial Bank Loans

Question 25

• agreement between a bank and a borrower indicating the maximum amount of credit the bank will extend to the borrower

Answer 25

Line of Credit

Question 26

• a formal line of credit. Similar to an informal line of credit but this makes the bank legally obligated to honor a revolving credit agreement, and it receives a commitment fee.

Answer 26

Revolving credit agreement

Question 27

Regular Interest Rate Formula

Answer 27

Interest / Borrowed Amount

Question 28

Discounted Interest Rate Formula

Answer 28

Interest Rate / Borrowed amount - Interest

Question 29

Effective Interest Rate Formula

Answer 29

Interest / Borrowed amount - interest - CB

Question 30

Short-term, unsecured note payable issued in large denominations by major companies with excellent credit ratings.

Answer 30

Commercial Paper

Question 31

Maturities usually do not
exceed 270 day

Answer 31

Commercial Paper

Question 32

Effective Annual Interest Rate Formula

Answer 32

Interest Cost per period / Usable Loan Amount