Question 1

Buffer inventories provide independence between different stages of the production process.

Accepted Answer

A) True 
 B)False  True

Question 2

The ABC classification system is a method for classifying inventory based on the percentage of total value and the percentage of total quantity.

Accepted Answer

A) True 
 B)False  True

Question 3

The economic order quantity is most widely used for determining how much to order in

Accepted Answer

A) a periodic inventory system. 
B) a continuous inventory system. 
C) an on-demand inventory system. 
D) none of the above. 
A) a periodic inventory system. 
B) a continuous inventory system. 
C) an on-demand inventory system. 
D) none of the above. B

Question 4

Annual demand for a product is 40,000 units.The product is used at a constant rate over the 365 days the company is open every year.The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00.If the company orders according to the economic order quantity (EOQ)formula then its total annual inventory cost for this product would be

Accepted Answer

A) $100,000. 
B) $50,000. 
C) $5,000. 
D) $2,500. 
A) $100,000. 
B) $50,000. 
C) $5,000. 
D) $2,500.

Question 5

The order cycle is the time between receipts of orders in an inventory cycle..

Accepted Answer

A) True 
 B)False

Question 6

In general,as the order size increases

Accepted Answer

A) ordering costs decrease and carrying costs increase. 
B) ordering costs increase and carrying costs decrease. 
C) both ordering and carrying costs increase. 
D) both ordering and carrying costs decrease. 
A) ordering costs decrease and carrying costs increase. 
B) ordering costs increase and carrying costs decrease. 
C) both ordering and carrying costs increase. 
D) both ordering and carrying costs decrease.

Question 7

Carry costs and ordering costs are inversely related.

Accepted Answer

A) True 
 B)False

Question 8

A quantity discount is a price discount available if a predetermined number of units is ordered.

Accepted Answer

A) True 
 B)False

Question 9

A product's usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125.The lead time for the product is 4 weeks.If the company would like to have a service level of 90% for this product then the reorder point is approximately

Accepted Answer

A) 8320 units. 
B) 9218 units. 
C) 10134 units. 
D) 11244 units. 
A) 8320 units. 
B) 9218 units. 
C) 10134 units. 
D) 11244 units.

Question 10

When demand is uncertain,a safety stock is often added to the expected demand during lead time to prevent a stockout.

Accepted Answer

A) True 
 B)False

Question 11

Maintaining a desired service level influencing the level of safety stock.

Accepted Answer

A) True 
 B)False

Question 12

Annual demand for a product is 40,000 units.The product is used at a constant rate over the 365 days the company is open every year.The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00.If the company orders according to the economic order quantity (EOQ)formula then the time between orders (order cycle time)is

Accepted Answer

A) 18.25 days. 
B) 24.33 days. 
C) 36.5 days. 
D) 73 days. 
A) 18.25 days. 
B) 24.33 days. 
C) 36.5 days. 
D) 73 days.

Question 13

The economic order quantity occurs when the annual carrying cost is equal to the annual ordering cost.

Accepted Answer

A) True 
 B)False

Question 14

Inventory costs _________________ when higher levels of inventory are needed to improve customer service.

Accepted Answer

A) decrease 
B) stay the same 
C) increase 
D) cannot be estimated 
A) decrease 
B) stay the same 
C) increase 
D) cannot be estimated

Question 15

Dependent demand is determined by external market conditions.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not an example of inventory carried to satisfy independent demand?

Accepted Answer

A) spare parts 
B) finished product 
C) raw materials 
D) All the above satisfy independent demand. 
A) spare parts 
B) finished product 
C) raw materials 
D) All the above satisfy independent demand.

Question 17

The _______________ classification system classifies inventory according to its dollar value to the firm.

Accepted Answer

A) periodic 
B) continuous 
C) ABC 
D) EOQ 
A) periodic 
B) continuous 
C) ABC 
D) EOQ

Question 18

The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50.The lead time for the component is 9 days.If a service level of 95% is desired,then the company's safety stock for this component is approximately

Accepted Answer

A) 150 units. 
B) 247 units. 
C) 336 units. 
D) 740 units. 
A) 150 units. 
B) 247 units. 
C) 336 units. 
D) 740 units.

Question 19

The economic order quantity (EOQ)model determines the optimal order size that minimizes total annual inventory costs.

Accepted Answer

A) True 
 B)False

Question 20

The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50.The lead-time for the component is 9 days.If a service level of 95% is desired then the company's reorder point for this component is approximately

Accepted Answer

A) 3785 units. 
B) 4500 units. 
C) 4627units. 
D) 4747units. 
A) 3785 units. 
B) 4500 units. 
C) 4627units. 
D) 4747units.

Exam 13: Inventory Management

Buffer inventories provide independence between different stages of the production process.

The ABC classification system is a method for classifying inventory based on the percentage of total value and the percentage of total quantity.

The economic order quantity is most widely used for determining how much to order in

The order cycle is the time between receipts of orders in an inventory cycle..

In general,as the order size increases

Carry costs and ordering costs are inversely related.

A quantity discount is a price discount available if a predetermined number of units is ordered.

A product's usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125.The lead time for the product is 4 weeks.If the company would like to have a service level of 90% for this product then the reorder point is approximately

When demand is uncertain,a safety stock is often added to the expected demand during lead time to prevent a stockout.

Maintaining a desired service level influencing the level of safety stock.

The economic order quantity occurs when the annual carrying cost is equal to the annual ordering cost.

Inventory costs _________________ when higher levels of inventory are needed to improve customer service.

Dependent demand is determined by external market conditions.

Which of the following is not an example of inventory carried to satisfy independent demand?

The _______________ classification system classifies inventory according to its dollar value to the firm.

The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50.The lead time for the component is 9 days.If a service level of 95% is desired,then the company's safety stock for this component is approximately

The economic order quantity (EOQ)model determines the optimal order size that minimizes total annual inventory costs.

The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50.The lead-time for the component is 9 days.If a service level of 95% is desired then the company's reorder point for this component is approximately

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