Question 1

What is the shadow price?

Accepted Answer

A) the price that indicates the amount by which throughput will increase for one unit of unconstrained resource 
B) the price paid on the black market for one unit of scarce resource 
C) the price paid for a scarce resource from an external provider 
D) the price that indicates the amount by which contribution margin will increase for one unit of scarce resource 
A) the price that indicates the amount by which throughput will increase for one unit of unconstrained resource 
B) the price paid on the black market for one unit of scarce resource 
C) the price paid for a scarce resource from an external provider 
D) the price that indicates the amount by which contribution margin will increase for one unit of scarce resource

Question 2

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.What is the impact on the total amount of annual carrying and ordering costs?

Accepted Answer

A) increase 
B) no change 
C) decrease 
D) substantial increase 
A) increase 
B) no change 
C) decrease 
D) substantial increase

Question 3

How does JIT prevent shutdowns due to materials shortage?

Accepted Answer

A) by maintenance only when needed 
B) by holding inventory 
C) by using total quality control to reduce defective materials 
D) by working with suppliers to ensure the availability of materials 
A) by maintenance only when needed 
B) by holding inventory 
C) by using total quality control to reduce defective materials 
D) by working with suppliers to ensure the availability of materials

Question 4

Which of the following is a common reason for shutdowns?

Accepted Answer

A) safety stock of inventory 
B) zero-defect materials 
C) machine maintenance 
D) unavailability of a material of subassembly 
A) safety stock of inventory 
B) zero-defect materials 
C) machine maintenance 
D) unavailability of a material of subassembly

Question 5

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100,200,and 300 units of X,Y,and Z,respectively,what is the expected return?

Accepted Answer

A) $120 
B) $24,000 
C) $28,000 
D) $36,000 
A) $120 
B) $24,000 
C) $28,000 
D) $36,000

Question 6

Burley Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order}&\$ 50.00\
\text {Unit carrying cost per year }& \$ 2.00 \
\text { Annual unit demand}&3,200\
\text {Safety stock }&80\
\text {Average daily demand }&10\
\text {Normal lead time in days }&12\
\end{array}$

-Refer to the figure.What is the economic order quantity for this item?

Accepted Answer

A) 16 units 
B) 400 units 
C) 500 units 
D) 160,000 units 
A) 16 units 
B) 400 units 
C) 500 units 
D) 160,000 units

Question 7

What order quantity is used in the EOQ model?

Accepted Answer

A) the quantity of inventory ordered during one year 
B) the quantity of inventory ordered for one job 
C) the quantity of inventory ordered for one department 
D) the quantity of inventory ordered at one time 
A) the quantity of inventory ordered during one year 
B) the quantity of inventory ordered for one job 
C) the quantity of inventory ordered for one department 
D) the quantity of inventory ordered at one time

Question 8

One of the traditional reasons for holding finished goods inventories is to ensure a firm's ability to meet delivery dates.What is the JIT solution meant to do?

Accepted Answer

A) reduce setup costs 
B) reduce lead time 
C) use total preventive maintenance 
D) use total quality control 
A) reduce setup costs 
B) reduce lead time 
C) use total preventive maintenance 
D) use total quality control

Question 9

Which of the following is a carrying cost?

Accepted Answer

A) receiving costs 
B) insurance 
C) clerical costs of preparing documents 
D) insurance costs on shipment 
A) receiving costs 
B) insurance 
C) clerical costs of preparing documents 
D) insurance costs on shipment

Question 10

Which of the following equations determines the total annual carrying costs when no safety stock is kept?

Accepted Answer

A) Cost of placing an order * Order quantity 
B) Cost of placing an order *  Number of orders per year 
C) Cost of placing an order *  One-half of the order quantity 
D) Unit carrying costs per year * One-half of the order quantity 
A) Cost of placing an order * Order quantity 
B) Cost of placing an order *  Number of orders per year 
C) Cost of placing an order *  One-half of the order quantity 
D) Unit carrying costs per year * One-half of the order quantity

Question 11

Tiffany Manufacturing Company produces X and Y with contribution margins per unit of $10 and $90, respectively. Only 200 labour hours and 400 machine hours are available for production.
Time requirements to produce one unit of X and Y are as follows:
$$\begin{array} { l c c } 
& \text { Product X } & \text { Product Y } \
\text { Labour hours per unit }  & 1 & 2 \
\text { Machine hours per unit } & 5 & 1
\end{array}$$
-Refer to the figure.What is the constraint on machine hours for Tiffany Manufacturing Company?

Accepted Answer

A) 1X + 2Y $\leq $200 
B) 1X + 2Y$\leq $ 400 
C) 5X + 1Y $\leq $ 400 
D) 10X + 90Y$\leq $ 200 
A) 1X + 2Y $\leq $200 
B) 1X + 2Y$\leq $ 400 
C) 5X + 1Y $\leq $ 400 
D) 10X + 90Y$\leq $ 200

Question 12

MapleSugar Company uses quantitative models for inventory control.For canned syrup,the annual demand is 8,000 cases.The supplier is 500 kilometres away,and it usually takes three days to get an order filled.The average order costs $16 to process and the carrying cost per case is $40 per year.The business is open 300 days a year.
a.Determine the economic order quantity.
b.Determine the reorder point if a safety stock of 24 cases is desired.

Accepted Answer

a.Economic order quantity =@#IMG-DLM& =

Question 13

What makes JIT superior to the traditional approach of inventory management?

Accepted Answer

A) The traditional approach accepts the existence of setup costs,but not carrying costs or inventories.JIT accepts the existence of setup and carrying costs,but pushes for zero inventories. 
B) The traditional approach accepts the existence of carrying costs and inventories,but not setup costs.JIT accepts the existence of setup costs but not carrying costs and pushes for zero inventories. 
C) The traditional approach accepts the existence of both setup costs and carrying costs and attempts to find the order quantity that best balances those costs.JIT does not accept either setup costs or carrying costs and pushes for zero inventory levels. 
D) The traditional approach does not accept carrying costs or setup costs.JIT minimizes both setup and carrying costs by finding the best order quantity to balance these costs. 
A) The traditional approach accepts the existence of setup costs,but not carrying costs or inventories.JIT accepts the existence of setup and carrying costs,but pushes for zero inventories. 
B) The traditional approach accepts the existence of carrying costs and inventories,but not setup costs.JIT accepts the existence of setup costs but not carrying costs and pushes for zero inventories. 
C) The traditional approach accepts the existence of both setup costs and carrying costs and attempts to find the order quantity that best balances those costs.JIT does not accept either setup costs or carrying costs and pushes for zero inventory levels. 
D) The traditional approach does not accept carrying costs or setup costs.JIT minimizes both setup and carrying costs by finding the best order quantity to balance these costs.

Question 14

How are finished goods inventories treated with JIT manufacturing?

Accepted Answer

A) They are kept high to avoid stockouts. 
B) They are held in various locations for faster delivery to customers. 
C) They are insignificant. 
D) They are kept high to let the company take advantage of volume discounts. 
A) They are kept high to avoid stockouts. 
B) They are held in various locations for faster delivery to customers. 
C) They are insignificant. 
D) They are kept high to let the company take advantage of volume discounts.

Question 15

The following information is available for Walters Furniture Company, which sells two products:
$\begin{array}{lcr}
&\text { Table X}&\text { Table Y}\
\text { Processing time } & 4 \text { hours } & 6 \text { hours } \
\text { Metal used } & 30 \mathrm{sq} \cdot \mathrm{m} . & 18 \mathrm{sq} . \mathrm{m} \
\text { Selling price } & \$ 200.00 & \$ 100.00 \
\text { Variable cost } & \$ 150.00 & \$ 60.00 \
\text { Fixed cost. } & \$ 30 . \mathrm{n} 0 & \$ 30.00
\end{array}$ There are 200 hours available in the plant and 200 square metres of metal available per operating period.
-Refer to the figure.What is the objective function for maximizing sales?

Accepted Answer

A) Maximize 50X + 40Y 
B) Maximize 180X + 90Y 
C) Maximize 200X + 100Y 
D) Minimize 200X + 100Y 
A) Maximize 50X + 40Y 
B) Maximize 180X + 90Y 
C) Maximize 200X + 100Y 
D) Minimize 200X + 100Y

Question 16

What is the definition of a loose constraint?

Accepted Answer

A) a constraint where the limiting factor is machine hours or labour availability 
B) a constraint where the limiting factor could be something like market demand 
C) a constraint where a product mix uses all of the limited resources of the constraint 
D) a constraint whose limited resources are not fully used by a product mix 
A) a constraint where the limiting factor is machine hours or labour availability 
B) a constraint where the limiting factor could be something like market demand 
C) a constraint where a product mix uses all of the limited resources of the constraint 
D) a constraint whose limited resources are not fully used by a product mix

Question 17

Big Bus Company produces buses.In order to produce the seats for the buses,special equipment must be set up.The setup cost per frame is $40.The cost of carrying seats in inventory is $5 per seat per year.The company produces 100,000 buses per year. What is the number of seats that should be produced per setup in order to minimize the total setup and carrying costs?

Accepted Answer

A) 566 seats 
B) 894 seats 
C) 1,265 seats 
D) 2,828 seats 
A) 566 seats 
B) 894 seats 
C) 1,265 seats 
D) 2,828 seats

Question 18

eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

-Refer to the figure.If there is a delay in shipping the item,approximately how many days can be covered by the safety stock?

Accepted Answer

A) 4 days 
B) 25 days 
C) 30 days 
D) 100 days 
A) 4 days 
B) 25 days 
C) 30 days 
D) 100 days

Question 19

eal Company has the following information available concerning one of its inventory items:
$\begin{array}{lr}
\text { Cost of placing an order } & \$ 32.00 \
\text { Unit carrying cost per year } & \$ 4.00 \
\text { Annual unit demand } & 5,625 \
\text { Safety stock } & 100 \
\text { Average daily demand } & 25 \
\text { Normal lead time in days } & 10
\end{array}$

-Refer to the figure.What is the reorder point for the inventory item?

Accepted Answer

A) 250 units 
B) 350 units 
C) 600 units 
D) 1,500 units 
A) 250 units 
B) 350 units 
C) 600 units 
D) 1,500 units

Question 20

Heft Company produces A and B with contribution margins per unit of $40 and $30,respectively.Only 500 labour hours and 300 machine hours are available for production. Time requirements to produce one unit of A and B are as follows:
$\begin{array}{lcc}
&\text {Product A }&\text {Product E}\
  \text { Labour hours per unit } &5&2\
 \text { Machine hours per unit } &1&4\
\end{array}$
 What is the constraint on machine hours for Heft Company?

Accepted Answer

A) 1A + 4B $\le$ 300 
B) 1A + 4B $\le$ 500 
C) 5A + 2B $\le$ 500 
D) 40A + 30B $\le$ 500 
A) 1A + 4B $\le$ 300 
B) 1A + 4B $\le$ 500 
C) 5A + 2B $\le$ 500 
D) 40A + 30B $\le$ 500

What is the shadow price?

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.What is the impact on the total amount of annual carrying and ordering costs?

How does JIT prevent shutdowns due to materials shortage?

Which of the following is a common reason for shutdowns?

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100,200,and 300 units of X,Y,and Z,respectively,what is the expected return?

What order quantity is used in the EOQ model?

One of the traditional reasons for holding finished goods inventories is to ensure a firm's ability to meet delivery dates.What is the JIT solution meant to do?

Which of the following is a carrying cost?

Which of the following equations determines the total annual carrying costs when no safety stock is kept?

What makes JIT superior to the traditional approach of inventory management?

How are finished goods inventories treated with JIT manufacturing?

What is the definition of a loose constraint?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Filters

Exam 18: Inventory Management: Economic Order Quantity,jit,and the Theory of Constraints

What is the shadow price?

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.What is the impact on the total amount of annual carrying and ordering costs?

How does JIT prevent shutdowns due to materials shortage?

Which of the following is a common reason for shutdowns?

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100,200,and 300 units of X,Y,and Z,respectively,what is the expected return?

What order quantity is used in the EOQ model?

One of the traditional reasons for holding finished goods inventories is to ensure a firm's ability to meet delivery dates.What is the JIT solution meant to do?

Which of the following is a carrying cost?

Which of the following equations determines the total annual carrying costs when no safety stock is kept?

What makes JIT superior to the traditional approach of inventory management?

How are finished goods inventories treated with JIT manufacturing?

What is the definition of a loose constraint?

A: Basic Cost Management Concepts

B: Basic Cost Management Concepts

Cost Behaviour

Cost-Volume-Profit Analysis

Job-Order Costing Systems

Process Costing

Activity-Based Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Responsibility Accounting,performance Evaluation,and Transfer Pricing

Tactical Decision Making

Pricing and Profitability Analysis

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Filters