Chapter Seven Select Solutions

Multiple Choice

1.

2.

3.

4.

5.
E. Safety Stock is represented by the line segment from
point E down to the
zero value point on the vertical axis.
6.

7.

8.

9.

10. B

2. ECONOMIC ORDER QUANTITY

a.

EOQ =

D = 28,000
S = $9
H = $1.25
EOQ = 635
b.

ROP = I x d

I=7
D = 200
ROP = 1400

LITTLE TITAN ENGINES, INC. (MANUAL SYSTEM WITH STAND

ALONE
PC SUPPORT)

Part C.

Risks in Current System

1.

Material usage is not properly controlled.

2.

Job time accounting may be inaccurately recorded

3.

Potential for theft of raw materials.

Part D.

Controls Needed to Reduce Risks

1.
Accounting Records; Excess Material Usage Requisitions should be used to
identify production problems and theft, loss, damage of raw materials.

2.

Supervision: Job time data should be reviewed and approved by a supervisor.

3.
Segregation of Duties: Storekeeper has asset custody and RM Inventory
recordkeeping responsibility. RM record keeping should be transferred to an
accounting function.