Question 1

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. B

Question 2

Annual purchase cost is included in the total cost in

Accepted Answer

A)  the EOQ model. 
B)  the economic production lot size model. 
C)  the quantity discount model. 
D)  all inventory models. 
A)  the EOQ model. 
B)  the economic production lot size model. 
C)  the quantity discount model. 
D)  all inventory models. C

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. C

Question 4

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 5

An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

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 9

If the optimal production lot size decreases, average inventory increases.

Accepted Answer

A) True 
 B)False

Question 10

Constant demand is a key assumption of the EOQ model.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

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 13

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 14

The EOQ model is insensitive to small variations or errors in the cost estimates.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

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 18

A weekly sports magazine publishes a special edition for the World Series. The sales forecast is for the number of copies to be normally distributed with mean 800,000 copies and standard deviation 60,000 copies. It costs $.35 to print a copy, and the newsstand price is $1.95. Unsold copies will be scrapped. How many copies should be printed?

Accepted Answer

P(demand < Q*) = 1.6

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

The time between placing orders is the lead time.

Accepted Answer

A) True 
 B)False

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

Annual purchase cost is included in the total cost in

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

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.

An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

Safety stock

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

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

If the optimal production lot size decreases, average inventory increases.

Constant demand is a key assumption of the EOQ model.

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

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

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

The EOQ model is insensitive to small variations or errors in the cost estimates.

The objective of the EOQ with quantity discounts model is to

Inventory

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

The time between placing orders is the lead time.

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

Forecasting

Markov Processes

Filters

Exam 10: Inventory Models

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

Annual purchase cost is included in the total cost in

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

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.

An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

Safety stock

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

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

If the optimal production lot size decreases, average inventory increases.

Constant demand is a key assumption of the EOQ model.

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

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

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

The EOQ model is insensitive to small variations or errors in the cost estimates.

The objective of the EOQ with quantity discounts model is to

Inventory

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

The time between placing orders is the lead time.

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

Forecasting

Markov Processes

Filters