Question 1

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

Accepted Answer

A)  three times as large 
B)  one-third as large 
C)  nine times as large 
D)  one-ninth as large 
E)  cannot be determined 
A)  three times as large 
B)  one-third as large 
C)  nine times as large 
D)  one-ninth as large 
E)  cannot be determined B

Question 2

Q is to __________ systems as P is to __________ systems.

Accepted Answer

A)  fixed quantity, fixed period 
B)  variable demand, constant demand 
C)  variable lead time, variable demand 
D)  variable quantity, variable period 
E)  None of the above is accurate 
A)  fixed quantity, fixed period 
B)  variable demand, constant demand 
C)  variable lead time, variable demand 
D)  variable quantity, variable period 
E)  None of the above is accurate A

Question 3

Which of the following statements regarding the reorder point is true?

Accepted Answer

A)  The reorder point is that quantity that triggers an action to restock an item. 
B)  There is a reorder point even if lead time and demand during lead time are constant. 
C)  The reorder point is larger than d x L if safety stock is present. 
D)  The fixed-period model has no reorder point. 
E)  All of the above are true. 
A)  The reorder point is that quantity that triggers an action to restock an item. 
B)  There is a reorder point even if lead time and demand during lead time are constant. 
C)  The reorder point is larger than d x L if safety stock is present. 
D)  The fixed-period model has no reorder point. 
E)  All of the above are true. E

Question 4

Which of the following statements about the basic EOQ model is false?

Accepted Answer

A)  If the setup cost were to decrease, the EOQ would fall. 
B)  If annual demand were to double, the number of orders per year would increase. 
C)  If the ordering cost were to increase, the EOQ would rise. 
D)  If annual demand were to double, the EOQ would also double. 
E)  All of the above statements are true. 
A)  If the setup cost were to decrease, the EOQ would fall. 
B)  If annual demand were to double, the number of orders per year would increase. 
C)  If the ordering cost were to increase, the EOQ would rise. 
D)  If annual demand were to double, the EOQ would also double. 
E)  All of the above statements are true.

Question 5

In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of __________.

Accepted Answer

demand rat

Question 6

The EOQ model with quantity discounts attempts to determine

Accepted Answer

A)  what is the lowest amount of inventory necessary to satisfy a certain service level 
B)  what is the lowest purchasing price 
C)  whether to use fixed-quantity or fixed-period order policy 
D)  how many units should be ordered 
E)  what is the shortest lead time 
A)  what is the lowest amount of inventory necessary to satisfy a certain service level 
B)  what is the lowest purchasing price 
C)  whether to use fixed-quantity or fixed-period order policy 
D)  how many units should be ordered 
E)  what is the shortest lead time

Question 7

In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this "rule" does not hold; explain how the model's results are optimal anyway.

Accepted Answer

This rule will not hold in all instances

Question 8

Which of these statements about the production order quantity model is false?

Accepted Answer

A)  The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous. 
B)  Because receipt is noninstantaneous, some units are used immediately, not stored in inventory. 
C)  Average inventory is less than one-half of the production order quantity. 
D)  All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity. 
E)  None of the above is false. 
A)  The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous. 
B)  Because receipt is noninstantaneous, some units are used immediately, not stored in inventory. 
C)  Average inventory is less than one-half of the production order quantity. 
D)  All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity. 
E)  None of the above is false.

Question 9

ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.

Accepted Answer

A) True 
 B)False

Question 10

A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard deviation of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level?

Accepted Answer

A)  .60 
B)  .20 
C)  .84 
D)  .40 
E)  unable to determine given the above information 
A)  .60 
B)  .20 
C)  .84 
D)  .40 
E)  unable to determine given the above information

Question 11

Clement Bait and Tackle has been buying a chemical water conditioner for its bait (to help keep its baitfish alive) in an optimal fashion using EOQ analysis. The supplier has now offered Clement a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly. Current data for the problem are: D = 720 units per year; S = $6.00, I = 20% per year; P = $25.
a. What is the EOQ at the current behavior?
b. What is the annual total cost, including product cost, of continuing their current behavior?
c. What are the annual total costs, if they accept either of the proposed discounts?
d. At the cheapest of the total costs, are carrying costs equal to ordering costs? Explain.

Accepted Answer

(a) Q* = @#IMG-DLM& = 41.57 or 42 units at a time.

Question 12

Louisiana Specialty Foods can produce their famous meat pies at a rate of 1650 cases of 48 pies each per day. The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day. The cost of setup, cleanup, idle time in transition from other products to pies, etc., is $320. Annual holding costs are $11.50 per case. Assume 250 days per year.
a. Determine the optimum production run.
b. Determine the number of production runs per year.
c. Determine maximum inventory.
d. Determine total inventory-related (setup and carrying) costs per year.

Accepted Answer

(a) Q*p = @#IMG-DLM& = @#IMG-DLM& = 2024.7 or 2035 cases.
(b

Question 13

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is

Accepted Answer

A)  $1.50 
B)  $2.00 
C)  $3.00 
D)  $150.00 
E)  not enough data to determine 
A)  $1.50 
B)  $2.00 
C)  $3.00 
D)  $150.00 
E)  not enough data to determine

Question 14

The purpose of safety stock is to

Accepted Answer

A)  replace failed units with good ones 
B)  eliminate the possibility of a stockout 
C)  eliminate the likelihood of a stockout due to erroneous inventory tally 
D)  control the likelihood of a stockout due to the variability of demand during lead time 
E)  protect the firm from a sudden decrease in demand 
A)  replace failed units with good ones 
B)  eliminate the possibility of a stockout 
C)  eliminate the likelihood of a stockout due to erroneous inventory tally 
D)  control the likelihood of a stockout due to the variability of demand during lead time 
E)  protect the firm from a sudden decrease in demand

Question 15

For a given level of demand, annual holding cost is larger as the order quantity is __________.

Accepted Answer

The answer of For a given level of demand, annual...

Question 16

Thomas' Bike Shop stocks a high volume item that has a normally distributed demand during the reorder period. The average daily demand is 70 units, the lead time is 4 days, and the standard deviation of demand during the reorder period is 15.
a. How much safety stock provides a 95% service level to Thomas?
b. What should the reorder point be?

Accepted Answer

a. SS = 1.65 x 15 =

Question 17

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

Accepted Answer

A)  $400 
B)  $800 
C)  $1200 
D)  Zero; this is a class C item. 
E)  Cannot be determined because unit price is not known. 
A)  $400 
B)  $800 
C)  $1200 
D)  Zero; this is a class C item. 
E)  Cannot be determined because unit price is not known.

Question 18

Daily demand for a product is normally distributed with a mean of 200 units and a standard deviation of 20 units. The firm currently uses a reorder point system, with a lead time of 4 days.
a. What safety stock provides a 50% service level?
b. What safety stock provides a 90% service level?
c. What safety stock provides a 99% service level?

Accepted Answer

Standard deviation during lead

Question 19

What is a reorder point?

Accepted Answer

A reorder point is the invento

Question 20

Cycle counting is an inventory control technique exclusively used for cyclical items.

Accepted Answer

A) True 
 B)False

Exam 12: Inventory Management

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

Q is to __________ systems as P is to __________ systems.

Which of the following statements regarding the reorder point is true?

Which of the following statements about the basic EOQ model is false?

In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of __________.

The EOQ model with quantity discounts attempts to determine

In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this "rule" does not hold; explain how the model's results are optimal anyway.

Which of these statements about the production order quantity model is false?

ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.

A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard deviation of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level?

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is

The purpose of safety stock is to

For a given level of demand, annual holding cost is larger as the order quantity is __________.

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

What is a reorder point?

Cycle counting is an inventory control technique exclusively used for cyclical items.

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Process Strategy

Location Strategies

Layout Strategies

Human Resources, Job Design, and Work Measurement

Supply-Chain Management

Aggregate Planning

Material Requirements Planning Mrp and Erp

Short-Term Scheduling

Just-In-Time and Lean Options

Maintenance and Reliability

Statistical Tools for Managers

Acceptance Sampling

The Simplex Method of Linear Programming

The Modi and Vam Methods of Solving Transportation Problems

Vehicle Routing and Scheduling

Managing Quality

Process Strategy

Supply-Chain Management

Vehicle Routing and Scheduling

Filters

Q is to systems as P is to systems.