Question 1

The order quantity used in the EOQ model is the quantity of inventory ordered

Accepted Answer

A) during one year. 
B) for one job. 
C) for one department. 
D) at one time. 
A) during one year. 
B) for one job. 
C) for one department. 
D) at one time.

Question 2

Walrus Company has the following information available concerning one of its inventory items: $$\begin{array} { l r } 
\text { Cost of placing an or der } & \$ 30.00 \
\text { Unit carrying cost per year } & \$ 3.00 \
\text { Annual unit demand } & 6,625 \
\text { Safety stock } & 125 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$$ The economic order quantity for this item is

Accepted Answer

A) 1,500 units. 
B) 364 units. 
C) 140 units. 
D) 725 units. 
A) 1,500 units. 
B) 364 units. 
C) 140 units. 
D) 725 units.

Question 3

The reorder point in the EOQ model is

Accepted Answer

A) the day of the month for reordering. 
B) when all of the inventory has been used. 
C) when the inventory level is below the order quantity. 
D) the inventory level at which an order for additional units is placed. 
A) the day of the month for reordering. 
B) when all of the inventory has been used. 
C) when the inventory level is below the order quantity. 
D) the inventory level at which an order for additional units is placed.

Question 4

If the objective is to maximize profits in a linear programming problem, the coefficients of the variables in the objective function should be the

Accepted Answer

A) selling price per unit. 
B) variable costs per unit. 
C) contribution margin per unit. 
D) fixed costs per unit. 
A) selling price per unit. 
B) variable costs per unit. 
C) contribution margin per unit. 
D) fixed costs per unit.

Question 5

Constraints whose limited resources are not fully used by a product mix are:

Accepted Answer

A) optimized constraints. 
B) linear constraints. 
C) binding constraints. 
D) loose constraints. 
A) optimized constraints. 
B) linear constraints. 
C) binding constraints. 
D) loose constraints.

Question 6

With JIT manufacturing, finished goods inventories are

Accepted Answer

A) kept high to avoid stockouts. 
B) held in various locations for faster delivery to customers. 
C) immaterial. 
D) kept high to let the company take advantage of volume discounts. 
A) kept high to avoid stockouts. 
B) held in various locations for faster delivery to customers. 
C) immaterial. 
D) kept high to let the company take advantage of volume discounts.

Question 7

The theory of constraints focuses on each of the following measures of organizational performance EXCEPT

Accepted Answer

A) revenues. 
B) throughput. 
C) operating expenses. 
D) inventory. 
A) revenues. 
B) throughput. 
C) operating expenses. 
D) inventory.

Question 8

Reducing ordering and setup costs interfere with the reduction of inventory costs.

Accepted Answer

A) True 
 B)False

Question 9

Ordering costs are costs of placing and receiving an order and setup costs are the costs of getting equipment and facilities to produce products.

Accepted Answer

A) True 
 B)False

Question 10

The objectives of JIT are achieved by

Accepted Answer

A) controlling costs. 
B) improving delivery performance. 
C) improving quality. 
D) all of these. 
A) controlling costs. 
B) improving delivery performance. 
C) improving quality. 
D) all of these.

Question 11

Magnitude Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production. Time requirements to produce one unit of A and B are as follows: $\begin{array}{lcc} 
& \text { Product A } & \text { Product B } \
\text { Labor hours per unit } & 5 & 2 \
\text { Machine hours per unit } & 1 & 4
\end{array}$ What is the constraint on machine hours for Magnitude Company?

Accepted Answer

A) 1A + 4B ? 300 
B) 5A + 2B ? 500 
C) 1A + 4B ? 500 
D) 40A + 30B ? 500 
A) 1A + 4B ? 300 
B) 5A + 2B ? 500 
C) 1A + 4B ? 500 
D) 40A + 30B ? 500

Question 12

Which of the following is NOT a common reason for shutdowns?

Accepted Answer

A) safety stock of inventory 
B) defective materials or subassemblies 
C) machine failure 
D) unavailability of a material of subassembly 
A) safety stock of inventory 
B) defective materials or subassemblies 
C) machine failure 
D) unavailability of a material of subassembly

Question 13

Inventory management identifies an economic order quantity that

Accepted Answer

A) minimizes the total costs of ordering and carrying inventory. 
B) maximizes the stockout costs. 
C) minimizes the costs of ordering. 
D) maximizes the cost of carrying inventory. 
A) minimizes the total costs of ordering and carrying inventory. 
B) maximizes the stockout costs. 
C) minimizes the costs of ordering. 
D) maximizes the cost of carrying inventory.

Question 14

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs. The JIT solution is to

Accepted Answer

A) reduce setup costs. 
B) reduce lead time. 
C) use total preventive maintenance. 
D) use total quality control. 
A) reduce setup costs. 
B) reduce lead time. 
C) use total preventive maintenance. 
D) use total quality control.

Question 15

When comparing the traditional approach of inventory management to JIT, which of the following statements is true?

Accepted Answer

A) The traditional approach accepts the existence of setup costs, but not carrying costs or inventories. JIT accepts the existence of setup and carrying costs, but pushes for zero inventories. 
B) The traditional approach accepts the existence of carrying costs and inventories, but not setup costs. JIT accepts the existence of setup costs but not carrying costs and pushes for zero inventories. 
C) The traditional approach accepts the existence of both setup costs and carrying costs and attempts to find the order quantity that best balances those costs. JIT does not accept either setup costs or carrying costs and pushes for zero inventory levels. 
D) The traditional approach does not accept carrying costs or setup costs. JIT minimizes both setup and carrying costs by finding the best order quantity to balance these costs. 
A) The traditional approach accepts the existence of setup costs, but not carrying costs or inventories. JIT accepts the existence of setup and carrying costs, but pushes for zero inventories. 
B) The traditional approach accepts the existence of carrying costs and inventories, but not setup costs. JIT accepts the existence of setup costs but not carrying costs and pushes for zero inventories. 
C) The traditional approach accepts the existence of both setup costs and carrying costs and attempts to find the order quantity that best balances those costs. JIT does not accept either setup costs or carrying costs and pushes for zero inventory levels. 
D) The traditional approach does not accept carrying costs or setup costs. JIT minimizes both setup and carrying costs by finding the best order quantity to balance these costs.

Question 16

Just-in-case inventory management is a traditional inventory model based on a wait-until-needed demand.

Accepted Answer

A) True 
 B)False

Question 17

Comfy Wheels Bus Company produces buses. In order to produce the seats for the buses, special equipment must be set up. The setup cost per frame is $35. The cost of carrying seats in inventory is $6 per seat per year. The company produces 90,000 buses per year.
Total setup costs associated with the economic order quantity are

Accepted Answer

A) $4,610. 
B) $3,073. 
C) $3,750. 
D) $1,537. 
A) $4,610. 
B) $3,073. 
C) $3,750. 
D) $1,537.

Question 18

The following information is available for Pullaway Trailer Company, which sells two products: $\begin{array}{lll}&\text { Trailer A } & \text { Trailer B }\
\text { Processing time } & 2 \text { hours } & 4 \text { hours } \
\text { Vinyl cover used } & 16 \text { sq. ft. } & 12 \text { sq. ft. } \
\text { Selling price } & \$ 50.00 & \$ 80.00 \
\text { Variable cost } & \$ 35.00 & \$ 50.00 \
\text { Fixed cost } & \$ 10.00 & \$ 20.00
\end{array}$ There are 100 hours available in the plant and 75 square feet of vinyl available per operating period.
Which of the following statements is INCORRECT?

Accepted Answer

A) The materials constraint favors Trailer B over Trailer A. 
B) The time constraint favors Trailer A over Trailer B. 
C) The material constraint favors Trailer A over Trailer B. 
D) The objective function favors Trailer B over Trailer A. 
A) The materials constraint favors Trailer B over Trailer A. 
B) The time constraint favors Trailer A over Trailer B. 
C) The material constraint favors Trailer A over Trailer B. 
D) The objective function favors Trailer B over Trailer A.

Question 19

JIT avoids shutdowns due to materials shortage in all of the following ways EXCEPT

Accepted Answer

A) using total preventive maintenance. 
B) holding inventory. 
C) using total quality control to reduce defective materials. 
D) working with suppliers to ensure the availability of materials. 
A) using total preventive maintenance. 
B) holding inventory. 
C) using total quality control to reduce defective materials. 
D) working with suppliers to ensure the availability of materials.

The order quantity used in the EOQ model is the quantity of inventory ordered

The reorder point in the EOQ model is

If the objective is to maximize profits in a linear programming problem, the coefficients of the variables in the objective function should be the

Constraints whose limited resources are not fully used by a product mix are:

With JIT manufacturing, finished goods inventories are

The theory of constraints focuses on each of the following measures of organizational performance EXCEPT

Reducing ordering and setup costs interfere with the reduction of inventory costs.

Ordering costs are costs of placing and receiving an order and setup costs are the costs of getting equipment and facilities to produce products.

The objectives of JIT are achieved by

Which of the following is NOT a common reason for shutdowns?

Inventory management identifies an economic order quantity that

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs. The JIT solution is to

When comparing the traditional approach of inventory management to JIT, which of the following statements is true?

Just-in-case inventory management is a traditional inventory model based on a wait-until-needed demand.

JIT avoids shutdowns due to materials shortage in all of the following ways EXCEPT

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Filters

Exam 20: Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

The order quantity used in the EOQ model is the quantity of inventory ordered

The reorder point in the EOQ model is

If the objective is to maximize profits in a linear programming problem, the coefficients of the variables in the objective function should be the

Constraints whose limited resources are not fully used by a product mix are:

With JIT manufacturing, finished goods inventories are

The theory of constraints focuses on each of the following measures of organizational performance EXCEPT

Reducing ordering and setup costs interfere with the reduction of inventory costs.

Ordering costs are costs of placing and receiving an order and setup costs are the costs of getting equipment and facilities to produce products.

The objectives of JIT are achieved by

Which of the following is NOT a common reason for shutdowns?

Inventory management identifies an economic order quantity that

One of the traditional reasons for holding inventory is to minimize total carrying costs and setup costs. The JIT solution is to

When comparing the traditional approach of inventory management to JIT, which of the following statements is true?

Just-in-case inventory management is a traditional inventory model based on a wait-until-needed demand.

JIT avoids shutdowns due to materials shortage in all of the following ways EXCEPT

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Filters