Question 1

The purpose of cycle counting is to

Accepted Answer

A) count all the items in inventory. 
B) count bicycles and motorcycles in inventory. 
C) reduce discrepancies between inventory records and actual quantities. 
D) reduce theft. 
E) count 10 percent of the items each month. 
A) count all the items in inventory. 
B) count bicycles and motorcycles in inventory. 
C) reduce discrepancies between inventory records and actual quantities. 
D) reduce theft. 
E) count 10 percent of the items each month. C

Question 2

It is critical that the exact quantity calculated in the EOQ model be ordered.

Accepted Answer

A) True 
 B)False  False

Question 3

The single-period model can be very helpful in determining how much to order.

Accepted Answer

A) True 
 B)False  True

Question 4

The A-B-C approach involves classifying inventory items based on their name.

Accepted Answer

A) True 
 B)False

Question 5

The manager of the Quick Stop Corner Convenience Store (which never closes)sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $0.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer.
At what point should he reorder Stein beer?

Accepted Answer

A) 0 cases remaining 
B) 4 cases remaining 
C) 12 cases remaining 
D) 16 cases remaining 
E) 20 cases remaining 
A) 0 cases remaining 
B) 4 cases remaining 
C) 12 cases remaining 
D) 16 cases remaining 
E) 20 cases remaining

Question 6

The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $0.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. At what point should resin be reordered?

Accepted Answer

A) 0 kilograms remaining 
B) 50 kilograms remaining 
C) 200 kilograms remaining 
D) 400 kilograms remaining 
E) 500 kilograms remaining 
A) 0 kilograms remaining 
B) 50 kilograms remaining 
C) 200 kilograms remaining 
D) 400 kilograms remaining 
E) 500 kilograms remaining

Question 7

An operations strategy for inventory management should work toward

Accepted Answer

A) increasing lot sizes. 
B) decreasing lot sizes. 
C) increasing safety stocks. 
D) decreasing service levels. 
E) increasing order quantities. 
A) increasing lot sizes. 
B) decreasing lot sizes. 
C) increasing safety stocks. 
D) decreasing service levels. 
E) increasing order quantities.

Question 8

In the basic EOQ model, if annual demand doubles, the effect on the EOQ is

Accepted Answer

A) It doubles. 
B) It is four times its previous amount. 
C) It is half its previous amount. 
D) It is about 70 percent of its previous amount. 
E) It increases by about 40 percent. 
A) It doubles. 
B) It is four times its previous amount. 
C) It is half its previous amount. 
D) It is about 70 percent of its previous amount. 
E) It increases by about 40 percent.

Question 9

Which is not a true assumption in the basic EOQ model?

Accepted Answer

A) Each order is received in a single delivery. 
B) Lead time does not vary. 
C) No more than three items are involved. 
D) Usage rate is constant. 
E) No quantity discounts. 
A) Each order is received in a single delivery. 
B) Lead time does not vary. 
C) No more than three items are involved. 
D) Usage rate is constant. 
E) No quantity discounts.

Question 10

ROP models indicate to managers the time between orders.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not one of the assumptions of the basic EOQ model?

Accepted Answer

A) Annual demand requirements are known and constant. 
B) Lead time does not vary. 
C) Each order is received in a single delivery. 
D) Quantity discounts are available. 
E) Ordering and holding costs have been estimated reasonably accurately. 
A) Annual demand requirements are known and constant. 
B) Lead time does not vary. 
C) Each order is received in a single delivery. 
D) Quantity discounts are available. 
E) Ordering and holding costs have been estimated reasonably accurately.

Question 12

Variability in demand and/or lead time can be compensated for by safety stock.

Accepted Answer

A) True 
 B)False

Question 13

The need for safety stocks can be reduced by an operations strategy which

Accepted Answer

A) increases lead time. 
B) increases lead time variability. 
C) increases lot sizes. 
D) decreases ordering costs. 
E) decreases lead time variability. 
A) increases lead time. 
B) increases lead time variability. 
C) increases lot sizes. 
D) decreases ordering costs. 
E) decreases lead time variability.

Question 14

Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.

Accepted Answer

A) True 
 B)False

Question 15

The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the dollar value of the average inventory level?

Accepted Answer

A) $3,000 
B) $6,000 
C) $12,500 
D) $300,000 
E) $600,000 
A) $3,000 
B) $6,000 
C) $12,500 
D) $300,000 
E) $600,000

Question 16

The introduction of quantity discounts will cause the optimum order quantity to be

Accepted Answer

A) smaller. 
B) unchanged. 
C) greater. 
D) smaller or unchanged. 
E) unchanged or greater. 
A) smaller. 
B) unchanged. 
C) greater. 
D) smaller or unchanged. 
E) unchanged or greater.

Question 17

Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances.

Accepted Answer

A) foreorder costs 
B) service costs 
C) shortage costs 
D) holding costs 
E) setup costs 
A) foreorder costs 
B) service costs 
C) shortage costs 
D) holding costs 
E) setup costs

Question 18

The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the average monthly total costs, EXCLUDING the value of the bills?

Accepted Answer

A) $625 
B) $1,250 
C) $2,500 
D) $3,125 
E) $37,500 
A) $625 
B) $1,250 
C) $2,500 
D) $3,125 
E) $37,500

Question 19

The calculation of safety stock requires knowledge of demand and lead time variability.

Accepted Answer

A) True 
 B)False

Question 20

In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of

Accepted Answer

A) 20. 
B) square root of 200. 
C) 200. 
D) 400. 
E) 600. 
A) 20. 
B) square root of 200. 
C) 200. 
D) 400. 
E) 600.

The purpose of cycle counting is to

It is critical that the exact quantity calculated in the EOQ model be ordered.

The single-period model can be very helpful in determining how much to order.

The A-B-C approach involves classifying inventory items based on their name.

An operations strategy for inventory management should work toward

In the basic EOQ model, if annual demand doubles, the effect on the EOQ is

Which is not a true assumption in the basic EOQ model?

ROP models indicate to managers the time between orders.

Which of the following is not one of the assumptions of the basic EOQ model?

Variability in demand and/or lead time can be compensated for by safety stock.

The need for safety stocks can be reduced by an operations strategy which

Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.

The introduction of quantity discounts will cause the optimum order quantity to be

Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances.

The calculation of safety stock requires knowledge of demand and lead time variability.

In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Strategic Capacity Planning for Products and Services

Process Selection and Facility Layout

Work Design and Measurement

Location Planning and Analysis

Management of Quality

Quality Control

Aggregate Planning and Master Scheduling

MRP and ERP

Jit and Lean Operations

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters

Exam 12: Inventory Management

The purpose of cycle counting is to

It is critical that the exact quantity calculated in the EOQ model be ordered.

The single-period model can be very helpful in determining how much to order.

The A-B-C approach involves classifying inventory items based on their name.

An operations strategy for inventory management should work toward

In the basic EOQ model, if annual demand doubles, the effect on the EOQ is

Which is not a true assumption in the basic EOQ model?

ROP models indicate to managers the time between orders.

Which of the following is not one of the assumptions of the basic EOQ model?

Variability in demand and/or lead time can be compensated for by safety stock.

The need for safety stocks can be reduced by an operations strategy which

Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.

The introduction of quantity discounts will cause the optimum order quantity to be

Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances.

The calculation of safety stock requires knowledge of demand and lead time variability.

In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Strategic Capacity Planning for Products and Services

Process Selection and Facility Layout

Work Design and Measurement

Location Planning and Analysis

Management of Quality

Quality Control

Aggregate Planning and Master Scheduling

MRP and ERP

Jit and Lean Operations

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters