Question 1

The period order quantity:

Accepted Answer

A)  Can only be applied to continuous demand. 
B)  Orders a constant amount for a set number of periods. 
C)  Works like a quantity discount. 
D)  Is based on the same assumptions as the EOQ model. 
E)  Orders the same quantity each period. 
A)  Can only be applied to continuous demand. 
B)  Orders a constant amount for a set number of periods. 
C)  Works like a quantity discount. 
D)  Is based on the same assumptions as the EOQ model. 
E)  Orders the same quantity each period. D

Question 2

Which of the following techniques balances the cost of ordering with the cost of carrying inventory?

Accepted Answer

A)  EOQ 
B)  POQ 
C)  The constant K 
D)  All of the above 
A)  EOQ 
B)  POQ 
C)  The constant K 
D)  All of the above D

Question 3

Quantity discounts:

Accepted Answer

A)  Make buyers order more than is economical. 
B)  Decrease the annual carrying costs but increase the ordering cos. 
C)  Can be a good decision if the total annual costs are reduced. 
D)  Always advantage the seller at a cost to the buyer. 
E)  Persuade the buyer to buy more often. 
A)  Make buyers order more than is economical. 
B)  Decrease the annual carrying costs but increase the ordering cos. 
C)  Can be a good decision if the total annual costs are reduced. 
D)  Always advantage the seller at a cost to the buyer. 
E)  Persuade the buyer to buy more often. C

Question 4

The period order quantity is equal to:

Accepted Answer

A)  Annual demand divided by EOQ. 
B)  EOQ divided by average period demand. 
C)  The carrying cost up to but not exceeding the ordering cost. 
D)  The sum of the carrying costs divided by cost per unit. 
E)  The part period cost times average inventory. 
A)  Annual demand divided by EOQ. 
B)  EOQ divided by average period demand. 
C)  The carrying cost up to but not exceeding the ordering cost. 
D)  The sum of the carrying costs divided by cost per unit. 
E)  The part period cost times average inventory.

Question 5

Using the POQ method of ordering, calculate the total cost of carrying and ordering inventory for the 6 week period shown. Use a POQ = 3 weeks for your answer.
$$\begin{array} { l c c c c c c } 
\text { Week } & 1 & 2 & 3 & 4 & 5 & 6 \
\text { Net requirements } & 60 & 40 & 10 & 50 & 20 & 30 \
\text { Planned order receipts } & & & & & & \
\text { Ending inventory } & & & & & &
\end{array}$$
Cost to place an order = $100.00
Cost to carry inventory = $1.00 per unit per week
Annual demand = 1,500 units
Cost per unit = $200.00
Opening inventory = 0 units

Accepted Answer

A)  $140 
B)  $280 
C)  $340 
D)  $400 
E)  none of the above 
A)  $140 
B)  $280 
C)  $340 
D)  $400 
E)  none of the above

Question 6

For a particular item the usage is 2000 units per year, the ordering cost is $10, the inventory carrying cost is 20% and the unit cost is $5. The economic order quantity is:

Accepted Answer

A)  20 units 
B)  200 units 
C)  2000 units 
D)  400 units 
E)  4000 units 
A)  20 units 
B)  200 units 
C)  2000 units 
D)  400 units 
E)  4000 units

Question 7

Which of the following statements is correct?

Accepted Answer

A)  you must know the ordering cost to use the EOQ concept 
B)  quantity discounts will not change the total inventory costs of the item 
C)  inventory levels can be lowered by raising the order quantity 
D)  if stock is not received all at once into inventory then EOQ formula can be modified and used 
E)  none of the above is correct 
A)  you must know the ordering cost to use the EOQ concept 
B)  quantity discounts will not change the total inventory costs of the item 
C)  inventory levels can be lowered by raising the order quantity 
D)  if stock is not received all at once into inventory then EOQ formula can be modified and used 
E)  none of the above is correct

Question 8

In the simple EOQ model annual inventory carrying costs and annual ordering costs vary:

Accepted Answer

A)  according to the time of year 
B)  with seasonally adjusted demand 
C)  with the order quantity 
D)  do not vary in any way 
E)  in an unknown manner 
A)  according to the time of year 
B)  with seasonally adjusted demand 
C)  with the order quantity 
D)  do not vary in any way 
E)  in an unknown manner

Question 9

If the order quantity is increased the annual cost of carrying inventory will:

Accepted Answer

A)  increase 
B)  decrease 
C)  remain the same 
D)  not be affected 
E)  none of the above 
A)  increase 
B)  decrease 
C)  remain the same 
D)  not be affected 
E)  none of the above

Question 10

For a certain group of items the cost of carrying inventory and the cost of placing orders is not exactly known but is about the same for all the items. The company has calculated K = 20 for these items. If one item has an annual demand (A) = $10,000 the NEW order quantity should be:

Accepted Answer

A)  $2,000 
B)  $10,000 
C)  $20,000 
D)  $50,000 
E)  none of the above 
A)  $2,000 
B)  $10,000 
C)  $20,000 
D)  $50,000 
E)  none of the above

Question 11

The EOQ for an item is 5500 units and the annual demand is 78,000 units. What is the period order quantity?

Accepted Answer

A)  14.18 
B)  0.27 
C)  3.67 
D)  4 
E)  cannot be determined from the given data 
A)  14.18 
B)  0.27 
C)  3.67 
D)  4 
E)  cannot be determined from the given data

Question 12

The letter 'K' used in lot sizing makes the order quantities.

Accepted Answer

A)  Order the big items more often and the low volume items less often. 
B)  Increase the average inventory. 
C)  Decrease the average inventory by gradually ordering more often. 
D)  Maintains the current inventory level while decreasing the number of orders. 
E)  Balances the safety stock of items with demand. 
A)  Order the big items more often and the low volume items less often. 
B)  Increase the average inventory. 
C)  Decrease the average inventory by gradually ordering more often. 
D)  Maintains the current inventory level while decreasing the number of orders. 
E)  Balances the safety stock of items with demand.

Question 13

In developing the standard economic order quantity formula the following assumption(s) is (are)
Made:

Accepted Answer

A)  demand for the item is relatively uniform 
B)  replenishment is in lots or batches that arrive at once 
C)  lead time is constant 
D)  all of the above are assumed 
E)  none of the above is assumed 
A)  demand for the item is relatively uniform 
B)  replenishment is in lots or batches that arrive at once 
C)  lead time is constant 
D)  all of the above are assumed 
E)  none of the above is assumed

Question 14

Assuming the cost per order is constant, increasing the order quantity will cause annual ordering costs to:

Accepted Answer

A)  decrease 
B)  increase 
C)  remain the same 
D)  increase at a decreasing rate 
E)  cannot be determined 
A)  decrease 
B)  increase 
C)  remain the same 
D)  increase at a decreasing rate 
E)  cannot be determined

Question 15

A firm uses $20,000 of an item per year. The carrying cost is 25%, the cost of ordering is $10 and the order quantity is $1,000. The annual total cost of carrying plus ordering would be:

Accepted Answer

A)  $2,500 
B)  $5,000 
C)  $500 
D)  $816 
E)  none of the above 
A)  $2,500 
B)  $5,000 
C)  $500 
D)  $816 
E)  none of the above

Question 16

In determining the economic order quantity (EOQ) the following costs are considered:

Accepted Answer

A)  costs of a stockout and ordering costs 
B)  costs of a stockout and inventory holding costs 
C)  ordering costs and inventory carrying costs 
D)  ordering costs and costs of changing production levels 
E)  inventory holding costs and costs of changing production levels 
A)  costs of a stockout and ordering costs 
B)  costs of a stockout and inventory holding costs 
C)  ordering costs and inventory carrying costs 
D)  ordering costs and costs of changing production levels 
E)  inventory holding costs and costs of changing production levels

Question 17

A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not?

Accepted Answer

A)  purchase cost 
B)  cost of carrying inventory 
C)  cost of placing one order 
D)  all of the above are relevant 
E)  none of the above is relevant 
A)  purchase cost 
B)  cost of carrying inventory 
C)  cost of placing one order 
D)  all of the above are relevant 
E)  none of the above is relevant

Question 18

While working a simple EOQ problem, you notice that, with a certain lot size, the annual ordering cost is exactly the same value as the annual inventory carrying cost. Which of the following is true?

Accepted Answer

A)  the lot size is the economic order quantity 
B)  total cost is at its maximum 
C)  the annual carrying cost will decrease if the order quantity is increased 
D)  all of the above 
E)  none of the above; the phenomenon is merely a coincidence 
A)  the lot size is the economic order quantity 
B)  total cost is at its maximum 
C)  the annual carrying cost will decrease if the order quantity is increased 
D)  all of the above 
E)  none of the above; the phenomenon is merely a coincidence

Question 19

If the economic order quantity is to be calculated in DOLLARS, then:

Accepted Answer

A)  the annual demand must be stated in dollars 
B)  ordering costs MUST be stated on a per UNIT basis 
C)  carrying costs are stated in dollars per unit 
D)  all the above are true 
E)  none of the above is true 
A)  the annual demand must be stated in dollars 
B)  ordering costs MUST be stated on a per UNIT basis 
C)  carrying costs are stated in dollars per unit 
D)  all the above are true 
E)  none of the above is true

Question 20

If a purchase discount is taken:
1) There is a saving in purchase cost.
2) Ordering costs are reduced.
3) Carrying costs are increased.
4) There is not necessarily a net saving.

Accepted Answer

A)  all the above are true 
B)  2 and 3 are true 
C)  3 and 4 are true 
D)  2 and 4 are true 
A)  all the above are true 
B)  2 and 3 are true 
C)  3 and 4 are true 
D)  2 and 4 are true

The period order quantity:

Which of the following techniques balances the cost of ordering with the cost of carrying inventory?

Quantity discounts:

The period order quantity is equal to:

For a particular item the usage is 2000 units per year, the ordering cost is $10, the inventory carrying cost is 20% and the unit cost is $5. The economic order quantity is:

Which of the following statements is correct?

In the simple EOQ model annual inventory carrying costs and annual ordering costs vary:

If the order quantity is increased the annual cost of carrying inventory will:

For a certain group of items the cost of carrying inventory and the cost of placing orders is not exactly known but is about the same for all the items. The company has calculated K = 20 for these items. If one item has an annual demand (A) = $10,000 the NEW order quantity should be:

The EOQ for an item is 5500 units and the annual demand is 78,000 units. What is the period order quantity?

The letter 'K' used in lot sizing makes the order quantities.

In developing the standard economic order quantity formula the following assumption(s) is (are) Made:

Assuming the cost per order is constant, increasing the order quantity will cause annual ordering costs to:

A firm uses $20,000 of an item per year. The carrying cost is 25%, the cost of ordering is $10 and the order quantity is $1,000. The annual total cost of carrying plus ordering would be:

In determining the economic order quantity (EOQ) the following costs are considered:

A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not?

While working a simple EOQ problem, you notice that, with a certain lot size, the annual ordering cost is exactly the same value as the annual inventory carrying cost. Which of the following is true?

If the economic order quantity is to be calculated in DOLLARS, then:

If a purchase discount is taken: 1) There is a saving in purchase cost. 2) Ordering costs are reduced. 3) Carrying costs are increased. 4) There is not necessarily a net saving.

Introduction to Materials Management

Production Planning System

Master Scheduling

Material Requirements Planning

Capacity Management

Production Activity Control

Purchasing

Forecasting

Inventory Fundamentals

Independent Demand Ordering Systems

Physical Inventory and Warehouse Management

Physical Distribution

Products and Processes

Lean Production

Total Quality Management

Filters

Exam 10: Order Quantities

The period order quantity:

Which of the following techniques balances the cost of ordering with the cost of carrying inventory?

Quantity discounts:

The period order quantity is equal to:

For a particular item the usage is 2000 units per year, the ordering cost is $10, the inventory carrying cost is 20% and the unit cost is $5. The economic order quantity is:

Which of the following statements is correct?

In the simple EOQ model annual inventory carrying costs and annual ordering costs vary:

If the order quantity is increased the annual cost of carrying inventory will:

For a certain group of items the cost of carrying inventory and the cost of placing orders is not exactly known but is about the same for all the items. The company has calculated K = 20 for these items. If one item has an annual demand (A) = $10,000 the NEW order quantity should be:

The EOQ for an item is 5500 units and the annual demand is 78,000 units. What is the period order quantity?

The letter 'K' used in lot sizing makes the order quantities.

In developing the standard economic order quantity formula the following assumption(s) is (are) Made:

Assuming the cost per order is constant, increasing the order quantity will cause annual ordering costs to:

A firm uses $20,000 of an item per year. The carrying cost is 25%, the cost of ordering is $10 and the order quantity is $1,000. The annual total cost of carrying plus ordering would be:

In determining the economic order quantity (EOQ) the following costs are considered:

A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not?

While working a simple EOQ problem, you notice that, with a certain lot size, the annual ordering cost is exactly the same value as the annual inventory carrying cost. Which of the following is true?

If the economic order quantity is to be calculated in DOLLARS, then:

If a purchase discount is taken: 1) There is a saving in purchase cost. 2) Ordering costs are reduced. 3) Carrying costs are increased. 4) There is not necessarily a net saving.

Introduction to Materials Management

Production Planning System

Master Scheduling

Material Requirements Planning

Capacity Management

Production Activity Control

Purchasing

Forecasting

Inventory Fundamentals

Independent Demand Ordering Systems

Physical Inventory and Warehouse Management

Physical Distribution

Products and Processes

Lean Production

Total Quality Management

Filters