Case Study
The Greenmore Lawn Products Company produces lawn fertilizer. One raw material—ammonium nitrate—is
purchased in large quantities in the making of fertilizer. 2,500,000 tons of ammonium nitrate are forecast to be
required next year to support production. If ammonium nitrate costs $122.50 per ton, carrying cost is 35 percent
of acquisition cost, and ordering cost is $1,595 per order:
Question 21:- In what quantities should Greenmore buy ammonium nitrate?
a) 15,235.25 tons per order
b) 13,638.395 tons per order
c) 13,638.395 tons per order
d) 15,235 tons per order
Question 22:- What annual stocking costs will be incurred if ammonium nitrate is ordered at the EOQ?
a) $ 584,746.20
b) $ 584,746.90
c) $ 594,746.20
d) $ 684,746.20
Question 23:- How many orders per year must Greenmore place for ammonium nitrate?
a) 193.3 orders per year
b) 183.3 orders per year
c) 188.3 orders per year
d) 283.3 orders per year
Question 24:- How much time will elapse between orders
a) about 4 days
b) about 3 days
c) about 5 days
d) about 2 days
Question 25:- What is the basic assumption in the case?
a) Demand is constant
b) No quantity discount available
c) Both A & B
d) none of the above