Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

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 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

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

Accepted Answer

A) True 
 B)False

Question 7

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 8

Constant demand is a key assumption of the EOQ model.

Accepted Answer

A) True 
 B)False

Question 9

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 10

The time between placing orders is the lead time.

Accepted Answer

A) True 
 B)False

Question 11

Which cost would not be considered part of a holding cost?

Accepted Answer

A) cost of capital 
B) shipping cost 
C) insurance cost 
D) warehouse overhead 
A) cost of capital 
B) shipping cost 
C) insurance cost 
D) warehouse overhead

Question 12

Every year in early October Steven King buys pumpkins of one size from a farmer in Maine and then hires an artist to carve bewitching faces in them.He then tries to sell them at his produce stand in a public market in Boston.
The farmer charges Steven $2.50 per pumpkin and the artist is paid $2.00 per carved pumpkin.Steven sells a carved pumpkin for $8.00.Any pumpkins not sold by 5:00 p.m.on Halloween are donated to Steven's favorite children's hospital.Steven pays the artist $0.75 per pumpkin to rush the pumpkins to the hospital for the youngsters to enjoy.
Steven estimates the demand for his pumpkins this season to be uniformly distributed within a range of 30 to 70.
a.How many pumpkins should Steven have available for sale?
b.Based on your answer to (a), what is the probability that Steven will be short five or more pumpkins?

Accepted Answer

a.46 pumpk

Question 13

Zip Games purchases blank DVD disks onto which it copies its software for sale through its mail order operation.A disk costs Zip $.20.Processing an order for more disks cost $15.Zip uses 60000 disks annually,and the company has a 25% cost of capital.
a.Find the optimal order quantity.
b.How many orders are placed annually?
c.How frequently will orders be placed?

Accepted Answer

a.Q* = 6000
b.10 ord

Question 14

The Super Discount store (open 24 hours a day,every day)sells 8-packs of paper towels,at the rate of approximately 420 packs per week.Because the towels are so bulky,the annual cost to carry them in inventory is estimated at $.50.The cost to place an order for more is $20 and it takes four days for an order to arrive.
a.Find the optimal order quantity.
b.What is the reorder point?
c.How often should an order be placed?

Accepted Answer

a.Q* = 1322
b.r = (6

Question 15

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,s

Question 16

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 17

For the periodic review model with probabilistic demand,the order quantity at each review period must be sufficient to cover demand for

Accepted Answer

A) the lead time for the current order 
B) the review period 
C) the review period plus the lead time for the following order 
D) the lead time for the current order plus the lead time for the following order 
A) the lead time for the current order 
B) the review period 
C) the review period plus the lead time for the following order 
D) the lead time for the current order plus the lead time for the following order

Question 18

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.

Question 19

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.Order 648 every 3.

Question 20

When quantity discounts are available,order an amount from the highest discount category.

Accepted Answer

A) True 
 B)False

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

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

The objective of the EOQ with quantity discounts model is to

The economic production lot size model is appropriate when

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

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

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

Constant demand is a key assumption of the EOQ model.

Safety stock

The time between placing orders is the lead time.

Which cost would not be considered part of a holding cost?

For the periodic review model with probabilistic demand,the order quantity at each review period must be sufficient to cover demand for

Annual purchase cost is included in the total cost in

When quantity discounts are available,order an amount from the highest discount category.

Introduction

Introduction to Probability

Probability Distributions

Decision Analysis

Utility and Game Theory

Times Series Analysis and Forecasting

Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Distribution and Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling: Pertcpm

Waiting Line Models

Simulation

Markov Processes

Filters

Exam 14: Inventory Models

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

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

The objective of the EOQ with quantity discounts model is to

The economic production lot size model is appropriate when

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

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

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

Constant demand is a key assumption of the EOQ model.

Safety stock

The time between placing orders is the lead time.

Which cost would not be considered part of a holding cost?

For the periodic review model with probabilistic demand,the order quantity at each review period must be sufficient to cover demand for

Annual purchase cost is included in the total cost in

When quantity discounts are available,order an amount from the highest discount category.

Introduction

Introduction to Probability

Probability Distributions

Decision Analysis

Utility and Game Theory

Times Series Analysis and Forecasting

Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance, and Operations Management

Distribution and Network Models

Integer Linear Programming

Advanced Optimization Applications

Project Scheduling: Pertcpm

Waiting Line Models

Simulation

Markov Processes

Filters