Question 1

The maximum inventory with backorders is

Accepted Answer

A) Q 
B) Q - S 
C) S 
D) (Q - S) / 2 
A) Q 
B) Q - S 
C) S 
D) (Q - S) / 2 B

Question 2

For the inventory model with planned shortages, the optimal order quantity results in

Accepted Answer

A) annual holding cost = annual ordering cost. 
B) annual holding cost = annual backordering cost. 
C) annual ordering cost = annual holding cost + annual backordering cost. 
D) annual ordering cost = annual holding cost - annual backordering cost. 
A) annual holding cost = annual ordering cost. 
B) annual holding cost = annual backordering cost. 
C) annual ordering cost = annual holding cost + annual backordering cost. 
D) annual ordering cost = annual holding cost - annual backordering cost. C

Question 3

The single-period inventory model is most applicable to items that are perishable or have seasonal demand.

Accepted Answer

A) True 
 B)False  True

Question 4

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

Accepted Answer

A) the Q* to increase 
B) the maximum inventory level to increase. 
C) the order cycle to decrease. 
D) annual holding cost to be less than annual setup cost. 
A) the Q* to increase 
B) the maximum inventory level to increase. 
C) the order cycle to decrease. 
D) annual holding cost to be less than annual setup cost.

Question 5

The objective of the EOQ with quantity discounts model is to

Accepted Answer

A) determine the minimum order quantity required for the maximum discount. 
B) balance annual ordering and holding costs. 
C) minimize annual purchase cost. 
D) minimize the sum of annual carrying, holding, and purchase costs. 
A) determine the minimum order quantity required for the maximum discount. 
B) balance annual ordering and holding costs. 
C) minimize annual purchase cost. 
D) minimize the sum of annual carrying, holding, and purchase costs.

Question 6

Inventory

Accepted Answer

A) is held against uncertain usage so that a supply of items is available if needed. 
B) constitutes a small part of the cost of doing business. 
C) is not something that can be managed effectively. 
D) All of the alternatives are correct. 
A) is held against uncertain usage so that a supply of items is available if needed. 
B) constitutes a small part of the cost of doing business. 
C) is not something that can be managed effectively. 
D) All of the alternatives are correct.

Question 7

Safety stock

Accepted Answer

A) can be determined by the EOQ formula. 
B) depends on the inventory position. 
C) depends on the variability of demand during lead time. 
D) is not needed if Q* is the actual order quantity. 
A) can be determined by the EOQ formula. 
B) depends on the inventory position. 
C) depends on the variability of demand during lead time. 
D) is not needed if Q* is the actual order quantity.

Question 8

When there is probabilistic demand in a multi-period model, the inventory level will not decrease smoothly and can fall below 0.

Accepted Answer

A) True 
 B)False

Question 9

The terms "inventory on hand" and "inventory position" have the same meaning.

Accepted Answer

A) True 
 B)False

Question 10

If an item's per-unit backorder cost is greater than its per-unit holding cost, no intentional shortage should be planned.

Accepted Answer

A) True 
 B)False

Question 11

The economic production lot size model is appropriate when

Accepted Answer

A) demand exceeds the production rate. 
B) there is a constant supply rate for every period, without pause. 
C) ordering cost is equivalent to the production setup cost. 
D) All of the alternatives are correct. 
A) demand exceeds the production rate. 
B) there is a constant supply rate for every period, without pause. 
C) ordering cost is equivalent to the production setup cost. 
D) All of the alternatives are correct.

Question 12

Which of the following is not implied when average inventory is Q/2, where Q is the order quantity?

Accepted Answer

A) An entire order quantity arrives at one time. 
B) The previous order quantity is entirely depleted when the next order arrives. 
C) An order quantity is depleted at a uniform rate over time. 
D) Backorders are permitted. 
A) An entire order quantity arrives at one time. 
B) The previous order quantity is entirely depleted when the next order arrives. 
C) An order quantity is depleted at a uniform rate over time. 
D) Backorders are permitted.

Question 13

The cost of overestimating demand is usually harder to determine than the cost of underestimating demand.

Accepted Answer

A) True 
 B)False

Question 14

Inventory models in which the rate of demand is constant are called

Accepted Answer

A) fixed models. 
B) deterministic models. 
C) JIT models. 
D) requirements models. 
A) fixed models. 
B) deterministic models. 
C) JIT models. 
D) requirements models.

Question 15

For the EOQ model, which of the following relationships is incorrect?

Accepted Answer

A) As the order quantity increases, the number of orders placed annually decreases. 
B) As the order quantity increases, annual holding cost increases. 
C) As the order quantity increases, annual ordering cost increases. 
D) As the order quantity increases, average inventory increases. 
A) As the order quantity increases, the number of orders placed annually decreases. 
B) As the order quantity increases, annual holding cost increases. 
C) As the order quantity increases, annual ordering cost increases. 
D) As the order quantity increases, average inventory increases.

Question 16

In the EOQ model, the average inventory per cycle over many cycles is Q/2.

Accepted Answer

A) True 
 B)False

Question 17

Periodic review systems require smaller safety stock levels than corresponding continuous review systems.

Accepted Answer

A) True 
 B)False

Question 18

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Accepted Answer

A) True 
 B)False

Question 19

For inventory systems with constant demand and a fixed lead time,

Accepted Answer

A) the reorder point = lead-time demand. B) the reorder point > lead-time demand. C) the reorder point < lead-time demand. D) the reorder point is unrelated to lead-time demand. A) the reorder point = lead-time demand. B) the reorder point > lead-time demand. C) the reorder point < lead-time demand. D) the reorder point is unrelated to lead-time demand.

Question 20

Periodic review inventory systems

Accepted Answer

A) are less subject to stockouts than corresponding continuous review systems. 
B) require larger safety stock levels than corresponding continuous review systems. 
C) have constant order quantities. 
D) make the coordination of orders for multiple products more difficult. 
A) are less subject to stockouts than corresponding continuous review systems. 
B) require larger safety stock levels than corresponding continuous review systems. 
C) have constant order quantities. 
D) make the coordination of orders for multiple products more difficult.

Exam 10: Inventory Models

The maximum inventory with backorders is

For the inventory model with planned shortages, the optimal order quantity results in

The single-period inventory model is most applicable to items that are perishable or have seasonal demand.

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

The objective of the EOQ with quantity discounts model is to

Inventory

Safety stock

When there is probabilistic demand in a multi-period model, the inventory level will not decrease smoothly and can fall below 0.

The terms "inventory on hand" and "inventory position" have the same meaning.

If an item's per-unit backorder cost is greater than its per-unit holding cost, no intentional shortage should be planned.

The economic production lot size model is appropriate when

Which of the following is not implied when average inventory is Q/2, where Q is the order quantity?

The cost of overestimating demand is usually harder to determine than the cost of underestimating demand.

Inventory models in which the rate of demand is constant are called

For the EOQ model, which of the following relationships is incorrect?

In the EOQ model, the average inventory per cycle over many cycles is Q/2.

Periodic review systems require smaller safety stock levels than corresponding continuous review systems.

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

For inventory systems with constant demand and a fixed lead time,

Periodic review inventory systems

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