Question 1

Excess inventory should be avoided if at all possible, since it must be either sold at a discount, sold for salvage, or dumped.

Accepted Answer

A) True 
 B)False  False

Question 2

Annual demand = 2000 units.Cost of order = $100
Holding cost = $10
Cost of backorder = $5
Cost of item = $50
Goodwill cost = $10
Should you use a planned shortage model or EOQ?

Accepted Answer

(EOQ since C_b > SQRT(2C_oC_h/D) 5 > SQRT(2*100*10/2000) 5 > 1 )

Question 3

In the single period inventory model, when the goodwill cost increases:

Accepted Answer

A) the optimal order quantity will decrease. 
B) the optimal order quantity will increase. 
C) the mean demand will increase. 
D) the mean demand will decrease. 
A) the optimal order quantity will decrease. 
B) the optimal order quantity will increase. 
C) the mean demand will increase. 
D) the mean demand will decrease. B

Question 4

The annual demand for inventory item 67J is 6000 SKU's.Order lead time is 6 workdays, and the firm's "year" is 300 days (6 workdays weekly, times 50 weeks).Empirical analysis indicates that the daily standard deviation of SKU demand is 4 units.If the firm desires only a 5% chance of a stockout, during any inventory cycle:
A.What is the corresponding safety stock level?
B.What is the corresponding reorder point, R?
C.Suppose Q* = 400.Now if the firm is willing to be out of stock of 67J, an average of no more than two inventory cycles per year, what should be the safety stock level?

Accepted Answer

A.( (z)(@#LAT-DLM&) = (1.645)(9.798) = 16.118.Rou

Question 5

Consider a basic economic order quantity (EOQ) model with the following characteristics:
$\begin{array}{ll}
\text { Item cost: } & \$ 15 . \
\text { Item selling price: } & \$ 20 .\
\text { Monthly demand: } &500 \text { units (constant) }\
\text { Annual holding cost: } & 9 \% \text { of purchase cost }\
\text { Cost per order: }& \$ 18\
\text { Order lead time: } & 5 \text { days } \
\text { Firm's work year: } & 300 \text { days ( } 50 \text { weeks } @ 6 \text { days per week) } \
\text { Safety stock: } & 15 \% \text { of monthly demand }
\end{array}$

For this problem, determine the values of:
A.Q* the optimal order quantity.
B.R, the reorder point.
C.T, the cycle time.
D.M, the maximum quantity in inventory.
E.Total annual inventory cost.
F.Suppose the vendor demands purchases in multiples of 500 only.
What is the increase in total annual inventory cost that this causes?

Accepted Answer

A.(400.)

B.(R = DL + SS; R = (6000/30

Question 6

In the planned shortage model, you cannot recommend a maximum inventory position of zero.

Accepted Answer

A) True 
 B)False

Question 7

In the economic order quantity (EOQ) model, if the holding cost and the ordering cost both double, the value of Q* will:

Accepted Answer

A) decrease by 50%. 
B) remain unchanged. 
C) double. 
D) quadruple. 
A) decrease by 50%. 
B) remain unchanged. 
C) double. 
D) quadruple.

Question 8

For the production lot size model to be appropriate, the relationship between D, annual demand, and P, maximum annual production rate, must be:

Accepted Answer

A) D > P. B) D = P. C) D < P. D) no necessary relationship exists. A) D > P. B) D = P. C) D < P. D) no necessary relationship exists.

Question 9

Quantity discounts reduce the unit price.Inventory costs are always reduced by opting for a quantity discount.

Accepted Answer

A) True 
 B)False

Question 10

In the planned shortage model, a zero value for R, the reorder point, means:

Accepted Answer

A) reorder only when a customer appears. 
B) instantaneous inventory replenishment. 
C) reorder when the back-order position is zero. 
D) reorder in a quantity equal to the back-order position. 
A) reorder only when a customer appears. 
B) instantaneous inventory replenishment. 
C) reorder when the back-order position is zero. 
D) reorder in a quantity equal to the back-order position.

Question 11

A two bin system is an example of a:

Accepted Answer

A) (R,M) policy. 
B) (R,Q) policy. 
C) (T,M) policy. 
D) (T,R,M) policy. 
A) (R,M) policy. 
B) (R,Q) policy. 
C) (T,M) policy. 
D) (T,R,M) policy.

Question 12

In the calculation of economic order quantity, manufacturing costs for items produced in-house include the costs of setting up the production line.

Accepted Answer

A) True 
 B)False

Question 13

Why is there no (T,Q) policy?

Accepted Answer

(To simply reorder a fixed amount at a f

Question 14

When comparing the safety stock of the cycle service level (SSc) approach with the safety stock level of the unit service level (SSu) approach, other things being equal:

Accepted Answer

A) SSc > SSu. B) SSc = SSu. C) SSc < SSu. D) no necessary relationship exists. A) SSc > SSu. B) SSc = SSu. C) SSc < SSu. D) no necessary relationship exists.

Question 15

In the single period inventory model, customer demand is always assumed to be:

Accepted Answer

A) normally distributed. 
B) uniformly distributed. 
C) of unknown distribution. 
D) stochastic. 
A) normally distributed. 
B) uniformly distributed. 
C) of unknown distribution. 
D) stochastic.

Question 16

Economic order quantity for production is optimal for a single product.The solution for several products sharing a production line requires computing an economic order quantity for each product.

Accepted Answer

A) True 
 B)False

Question 17

"Shrinkage" of inventory includes:

Accepted Answer

A) reduced unit value. 
B) theft. 
C) obsolescence. 
D) misplacement. 
A) reduced unit value. 
B) theft. 
C) obsolescence. 
D) misplacement.

Question 18

In the single period inventory model, the probability distribution for customer demand:

Accepted Answer

A) must be discrete. 
B) is directly derived from sales data. 
C) may be continuous. 
D) is generally assumed to be uniform. 
A) must be discrete. 
B) is directly derived from sales data. 
C) may be continuous. 
D) is generally assumed to be uniform.

Question 19

The strongest factor influencing the choice of inventory model is the:

Accepted Answer

A) pattern of demand. 
B) value of the inventoried item. 
C) presence or absence of quantity discounts. 
D) presence or absence of safety stocks. 
A) pattern of demand. 
B) value of the inventoried item. 
C) presence or absence of quantity discounts. 
D) presence or absence of safety stocks.

Question 20

In the single period inventory model, the optimal service level is the proportion of total customer demand that will be satisfied in any given period.

Accepted Answer

A) True 
 B)False

Excess inventory should be avoided if at all possible, since it must be either sold at a discount, sold for salvage, or dumped.

Annual demand = 2000 units.Cost of order = $100 Holding cost = $10 Cost of backorder = $5 Cost of item = $50 Goodwill cost = $10 Should you use a planned shortage model or EOQ?

In the single period inventory model, when the goodwill cost increases:

In the planned shortage model, you cannot recommend a maximum inventory position of zero.

In the economic order quantity (EOQ) model, if the holding cost and the ordering cost both double, the value of Q* will:

For the production lot size model to be appropriate, the relationship between D, annual demand, and P, maximum annual production rate, must be:

Quantity discounts reduce the unit price.Inventory costs are always reduced by opting for a quantity discount.

In the planned shortage model, a zero value for R, the reorder point, means:

A two bin system is an example of a:

In the calculation of economic order quantity, manufacturing costs for items produced in-house include the costs of setting up the production line.

Why is there no (T,Q) policy?

When comparing the safety stock of the cycle service level (SSc) approach with the safety stock level of the unit service level (SSu) approach, other things being equal:

In the single period inventory model, customer demand is always assumed to be:

Economic order quantity for production is optimal for a single product.The solution for several products sharing a production line requires computing an economic order quantity for each product.

"Shrinkage" of inventory includes:

In the single period inventory model, the probability distribution for customer demand:

The strongest factor influencing the choice of inventory model is the:

In the single period inventory model, the optimal service level is the proportion of total customer demand that will be satisfied in any given period.

Introduction to Management Science Models

Introduction to Management Science Models

Applications of Linear and Integer Programming Models

Network Models

Project Scheduling Models

Decision Models

Forecasting

Queuing Models

Simulation Models

Quality Management Models

Markov Process Models

Nonlinear Models:dynamic, Goal, and Nonlinear Programming

Filters

Exam 8: Inventory Models

Excess inventory should be avoided if at all possible, since it must be either sold at a discount, sold for salvage, or dumped.

Annual demand = 2000 units.Cost of order = $100 Holding cost = $10 Cost of backorder = $5 Cost of item = $50 Goodwill cost = $10 Should you use a planned shortage model or EOQ?

In the single period inventory model, when the goodwill cost increases:

In the planned shortage model, you cannot recommend a maximum inventory position of zero.

In the economic order quantity (EOQ) model, if the holding cost and the ordering cost both double, the value of Q* will:

For the production lot size model to be appropriate, the relationship between D, annual demand, and P, maximum annual production rate, must be:

Quantity discounts reduce the unit price.Inventory costs are always reduced by opting for a quantity discount.

In the planned shortage model, a zero value for R, the reorder point, means:

A two bin system is an example of a:

In the calculation of economic order quantity, manufacturing costs for items produced in-house include the costs of setting up the production line.

Why is there no (T,Q) policy?

When comparing the safety stock of the cycle service level (SSc) approach with the safety stock level of the unit service level (SSu) approach, other things being equal:

In the single period inventory model, customer demand is always assumed to be:

Economic order quantity for production is optimal for a single product.The solution for several products sharing a production line requires computing an economic order quantity for each product.

"Shrinkage" of inventory includes:

In the single period inventory model, the probability distribution for customer demand:

The strongest factor influencing the choice of inventory model is the:

In the single period inventory model, the optimal service level is the proportion of total customer demand that will be satisfied in any given period.

Introduction to Management Science Models

Introduction to Management Science Models

Applications of Linear and Integer Programming Models

Network Models

Project Scheduling Models

Decision Models

Forecasting

Queuing Models

Simulation Models

Quality Management Models

Markov Process Models

Nonlinear Models:dynamic, Goal, and Nonlinear Programming

Filters