Question 1

A stockout is a situation that occurs when there is no inventory on hand.

Accepted Answer

A) True 
 B)False

Question 2

The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4. If the company wishes to maintain a 90 percent service level, how much safety stock should be held?

Accepted Answer

A)  45.12 
B)  41.28 
C)  1.28 
D)  5.12 
E)  None of the above 
A)  45.12 
B)  41.28 
C)  1.28 
D)  5.12 
E)  None of the above

Question 3

Economic order quantity (EOQ) analysis has recently become practical as a consequence of high-speed computers.

Accepted Answer

A) True 
 B)False

Question 4

The costs involved in a typical inventory model are order costs, management costs, and holding costs.

Accepted Answer

A) True 
 B)False

Question 5

List three general categories of inventory.

Accepted Answer

raw material, work-i

Question 6

The reorder point occurs during a stockout.

Accepted Answer

A) True 
 B)False

Question 7

The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. How many units should the company order each time an order is placed if the company wishes to minimize total inventory cost?

Accepted Answer

A)  100 
B)  200 
C)  250 
D)  500 
E)  None of the above 
A)  100 
B)  200 
C)  250 
D)  500 
E)  None of the above

Question 8

Which of the following is not a potential drawback of an ERP system?

Accepted Answer

A)  Training employees on the use of the new software can be expensive. 
B)  The software is costly to customize. 
C)  The software is expensive to buy. 
D)  The implementation may require a company to change its normal operations. 
E)  It does not incorporate inventory control decisions. 
A)  Training employees on the use of the new software can be expensive. 
B)  The software is costly to customize. 
C)  The software is expensive to buy. 
D)  The implementation may require a company to change its normal operations. 
E)  It does not incorporate inventory control decisions.

Question 9

Consider the material structure tree for item A below. If 10 units of A are needed, how many units of E are needed?

Accepted Answer

A)  60 
B)  6 
C)  240 
D)  24 
E)  480 
A)  60 
B)  6 
C)  240 
D)  24 
E)  480

Question 10

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units. However, due to recent events he has a cash flow problem. Therefore, he orders only 100 units each time he places an order. Which of the following is true for this situation?

Accepted Answer

A)  Annual ordering cost will be lower than annual holding cost. 
B)  Annual ordering cost will be higher than annual holding cost. 
C)  Annual ordering cost will equal annual holding cost. 
D)  Annual ordering cost will be unaffected by the order policy change. 
E)  Nothing can be determined without more information. 
A)  Annual ordering cost will be lower than annual holding cost. 
B)  Annual ordering cost will be higher than annual holding cost. 
C)  Annual ordering cost will equal annual holding cost. 
D)  Annual ordering cost will be unaffected by the order policy change. 
E)  Nothing can be determined without more information.

Question 11

In ABC inventory analysis, items in the "A" group should have the lowest dollar value to the firm.

Accepted Answer

A) True 
 B)False

Question 12

A person is using the normal distribution to determine the safety stock for a product. The Z value of 1.65 would be associated with what service level?

Accepted Answer

A)  90 percent 
B)  95 percent 
C)  100 percent 
D)  92.5 percent 
E)  None of the above 
A)  90 percent 
B)  95 percent 
C)  100 percent 
D)  92.5 percent 
E)  None of the above

Question 13

Which of the following is part of the determination of EOQ?

Accepted Answer

A)  cost of production labor 
B)  cost of stockouts 
C)  purchase cost 
D)  annual demand 
E)  total revenue 
A)  cost of production labor 
B)  cost of stockouts 
C)  purchase cost 
D)  annual demand 
E)  total revenue

Question 14

Safety stock is ignored when computing the reorder point.

Accepted Answer

A) True 
 B)False

Question 15

Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The annual demand for a particular stapler is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line is $25. There are 200 working days per year. The production rate for this product is 80 per day. If Rolf decided to produce 200 units each time he started production of the stapler, what would his maximum inventory level be?

Accepted Answer

A)  200 
B)  180 
C)  100 
D)  90 
E)  None of the above 
A)  200 
B)  180 
C)  100 
D)  90 
E)  None of the above

Question 16

In the ABC analysis of inventory, the A group items

Accepted Answer

A)  are critical to the functioning of the organization. 
B)  are the most expensive class of items. 
C)  typically account for over 70 percent of the company's business in dollars. 
D)  typically account for about 10 percent of a company's inventory items. 
E)  All of the above 
A)  are critical to the functioning of the organization. 
B)  are the most expensive class of items. 
C)  typically account for over 70 percent of the company's business in dollars. 
D)  typically account for about 10 percent of a company's inventory items. 
E)  All of the above

Question 17

Which of the following is not a use of inventory?

Accepted Answer

A)  the decoupling function 
B)  quantity discounts 
C)  irregular supply and demand 
D)  the translucent function 
E)  to avoid stockouts and shortages 
A)  the decoupling function 
B)  quantity discounts 
C)  irregular supply and demand 
D)  the translucent function 
E)  to avoid stockouts and shortages

Question 18

As the service level increases,

Accepted Answer

A)  carrying cost increases at an increasing rate. 
B)  carrying cost increases at a decreasing rate. 
C)  carrying cost decreases at a decreasing rate. 
D)  carrying cost decreases at an increasing rate. 
E)  None of the above 
A)  carrying cost increases at an increasing rate. 
B)  carrying cost increases at a decreasing rate. 
C)  carrying cost decreases at a decreasing rate. 
D)  carrying cost decreases at an increasing rate. 
E)  None of the above

Question 19

Jack Spratt is the production manager for a manufacturing firm that produces wizzy-gadgets and other items. The annual demand for a particular wizzy-gadget is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line is $25. There are 200 working days per year. The production rate for this product is 80 per day. If his maximum inventory level is 180 units, how many units did he produce each time he started production of the wizzy-gadgets?

Accepted Answer

A)  200 
B)  180 
C)  100 
D)  90 
E)  None of the above 
A)  200 
B)  180 
C)  100 
D)  90 
E)  None of the above

Question 20

ArtOrgan, Ltd. distributes mechanical replacements for human mitral heart valves. Its artificial valve has a demand of 12,765 units per year and sells for $7,900 per unit. The cost of ordering is $75 per order and the average carrying cost per unit per year is $150. Determine the economic order quantity.

Accepted Answer

The answer of ArtOrgan, Ltd. distributes mechanical replacements for human...

A stockout is a situation that occurs when there is no inventory on hand.

The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4. If the company wishes to maintain a 90 percent service level, how much safety stock should be held?

Economic order quantity (EOQ) analysis has recently become practical as a consequence of high-speed computers.

The costs involved in a typical inventory model are order costs, management costs, and holding costs.

List three general categories of inventory.

The reorder point occurs during a stockout.

Which of the following is not a potential drawback of an ERP system?

Consider the material structure tree for item A below. If 10 units of A are needed, how many units of E are needed?

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units. However, due to recent events he has a cash flow problem. Therefore, he orders only 100 units each time he places an order. Which of the following is true for this situation?

In ABC inventory analysis, items in the "A" group should have the lowest dollar value to the firm.

A person is using the normal distribution to determine the safety stock for a product. The Z value of 1.65 would be associated with what service level?

Which of the following is part of the determination of EOQ?

Safety stock is ignored when computing the reorder point.

In the ABC analysis of inventory, the A group items

Which of the following is not a use of inventory?

As the service level increases,

Introduction to Quantitative Analysis

Probability Concepts and Applications

Decision Analysis

Regression Models

Forecasting

Linear Programming Models: Graphical and Computer Methods

Linear Programming Applications

Transportation and Assignment Models

Integer Programming, Goal Programming, and Nonlinear Programming

Network Models

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Waiting Lines and Queuing Theory Models

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Exam 6: Inventory Control Models

A stockout is a situation that occurs when there is no inventory on hand.

The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4. If the company wishes to maintain a 90 percent service level, how much safety stock should be held?

Economic order quantity (EOQ) analysis has recently become practical as a consequence of high-speed computers.

The costs involved in a typical inventory model are order costs, management costs, and holding costs.

List three general categories of inventory.

The reorder point occurs during a stockout.

Which of the following is not a potential drawback of an ERP system?

Consider the material structure tree for item A below. If 10 units of A are needed, how many units of E are needed?

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units. However, due to recent events he has a cash flow problem. Therefore, he orders only 100 units each time he places an order. Which of the following is true for this situation?

In ABC inventory analysis, items in the "A" group should have the lowest dollar value to the firm.

A person is using the normal distribution to determine the safety stock for a product. The Z value of 1.65 would be associated with what service level?

Which of the following is part of the determination of EOQ?

Safety stock is ignored when computing the reorder point.

In the ABC analysis of inventory, the A group items

Which of the following is not a use of inventory?

As the service level increases,

Introduction to Quantitative Analysis

Probability Concepts and Applications

Decision Analysis

Regression Models

Forecasting

Linear Programming Models: Graphical and Computer Methods

Linear Programming Applications

Transportation and Assignment Models

Integer Programming, Goal Programming, and Nonlinear Programming

Network Models

Project Management

Waiting Lines and Queuing Theory Models

Simulation Modeling

Markov Analysis

Statistical Quality Control

Filters