Question 1

The EOQ model

Accepted Answer

A)  determines only how frequently to order. 
B)  considers total cost. 
C)  minimizes both ordering and holding costs. 
D)  All of the alternatives are correct. 
A)  determines only how frequently to order. 
B)  considers total cost. 
C)  minimizes both ordering and holding costs. 
D)  All of the alternatives are correct.

Question 2

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 3

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.

Question 4

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.

Question 5

An office supply store open 5 days a week must determine the best inventory policy for boxes of copier paper. Weekly demand is nearly constant at 250 boxes and when orders are placed, then entire shipment arrives at once. The cost per box is $22 and the inventory holding cost is 30%. Orders are placed at a cost of $40 each, including preparation time and communication charges, and the lead time is 2 days.
a.Find the optimal order quantity.
b.What is the reorder point?
c.How often should an order be placed?
d.What is the cycle time?

Accepted Answer

a.Q* = 397
B.TC = .5

Question 6

For the EOQ model, cycle time is the time between

Accepted Answer

A)  placing successive orders 
B)  placing and receiving an order 
C)  stocking out and receiving an order 
D)  receiving and storing an order 
A)  placing successive orders 
B)  placing and receiving an order 
C)  stocking out and receiving an order 
D)  receiving and storing an order

Question 7

The time between placing orders is the lead time.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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 10

As lead time for an item increases, the cycle time increases.

Accepted Answer

A) True 
 B)False

Question 11

Henderson Furniture sells reproductions of 18th century furniture. For a particular table, the assumptions of the inventory model with backorders are valid.
D = 200 tables per year
I = 25% per year
C = $800 per table
Co = $80 per order
Cb = $50 per table per year
The store is open 250 days a year.
a.What are the values for order quantity and number of planned backorders that will minimize total cost?
b.What is the maximum inventory?
c.What is the cycle time?
d.What is total cost?

Accepted Answer

a.Q* = 28.28
S* = 28.28(200/25

Question 12

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 13

A lawn and garden shop that is open for business seven days a week orders bags of grass seed every OTHER Monday. Lead time for seed orders is 5 days. On Monday, at ordering time, a clerk found 112 bags of seed in stock, and so he ordered 198 bags. Daily demand for grass seed is normally distributed with a mean of 15 bags and a standard deviation of four bags.
The manager would like to know what the probability is that a grass seed stockout will occur before the next order arrives.

Accepted Answer

z = 1.43,

Question 14

​List five assumptions of the EOQ model.

Accepted Answer

The Economic Order Quantity (EOQ) model

Question 15

Demand for a popular athletic shoe is nearly constant at 800 pairs per week for a regional division of a national retailer. The cost per pair is $54. It costs $72 to place an order, and annual holding costs are charged at 22% of the cost per unit. The lead time is two weeks.
a.What is the EOQ?
b.What is the reorder point?
c.What is the cycle time?
d.What is the total annual cost?

Accepted Answer

a.Q* = 710.1
B.r = 1600
C.T =

Question 16

​For the periodic review inventory model presented in the textbook, it is assumed that a special replenishment order will be placed in the event of a stockout between review points.

Accepted Answer

A) True 
 B)False

Question 17

When demand is independent, it is not related to demand for other components or items produced by the firm.

Accepted Answer

A) True 
 B)False

Question 18

Inventory position is defined as the amount of inventory on hand plus the amount

Accepted Answer

A)  on order 
B)  promised to customers 
C)  on reserve 
D)  to be returned to suppliers 
A)  on order 
B)  promised to customers 
C)  on reserve 
D)  to be returned to suppliers

Question 19

Bank Drugs sells Jami Michelle lipstick. The Jami Michelle Company offers a 6% discount on orders of at least 500 tubes, a 10% discount on orders of at least 1,000 tubes, a 12% discount on orders of at least 1,800 tubes and a 15% discount on orders at least 2,500 tubes.
Bank sells an average of 40 tubes of Jami Michelle lipstick weekly. The normal price paid by Bank drugs is $1 per tube. If it costs Bank $30 to place an order, and Bank's annual holding cost rate is 27%, determine the optimal order policy for Bank Drugs.

Accepted Answer

Order 1000

Question 20

Kelly's Service Station does a large business in tune-ups. Demand has been averaging 210 spark plugs per week. Holding costs are $.01 per plug per week and reorder costs are estimated at $10 per order.
Kelly does not want to be out of stock on more than 1% of his orders. There is a one-day delivery time. The standard deviation of demand is five plugs per day. Assume a normal distribution of demand during lead time and a 7-day work week.
a.
What inventory policy do you suggest for Kelly's station?
b.
What is the average amount of safety stock for the reorder point in (a)?
c.
What are the total variable weekly costs including safety stock costs?

Accepted Answer

​
a. 90.82%
​b. r =

The EOQ model

The economic production lot size model is appropriate when

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

Periodic review inventory systems

For the EOQ model, cycle time is the time between

The time between placing orders is the lead time.

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

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

As lead time for an item increases, the cycle time increases.

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

List five assumptions of the EOQ model.

For the periodic review inventory model presented in the textbook, it is assumed that a special replenishment order will be placed in the event of a stockout between review points.

When demand is independent, it is not related to demand for other components or items produced by the firm.

Inventory position is defined as the amount of inventory on hand plus the amount

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Advanced Linear Programming Applications

Distribution and Network Models

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Waiting Line Models

Simulation

Decision Analysis

Multicriteria Decisions

Time Series Analysis and Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

Exam 10: Inventory Models

The EOQ model

The economic production lot size model is appropriate when

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

Periodic review inventory systems

For the EOQ model, cycle time is the time between

The time between placing orders is the lead time.

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

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

As lead time for an item increases, the cycle time increases.

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

​List five assumptions of the EOQ model.

​For the periodic review inventory model presented in the textbook, it is assumed that a special replenishment order will be placed in the event of a stockout between review points.

When demand is independent, it is not related to demand for other components or items produced by the firm.

Inventory position is defined as the amount of inventory on hand plus the amount

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Advanced Linear Programming Applications

Distribution and Network Models

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Waiting Line Models

Simulation

Decision Analysis

Multicriteria Decisions

Time Series Analysis and Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

List five assumptions of the EOQ model.

For the periodic review inventory model presented in the textbook, it is assumed that a special replenishment order will be placed in the event of a stockout between review points.