Question 1

At the economic order quantity,holding costs are equal to product costs.

Accepted Answer

A) True 
 B)False

Question 2

In some inventory models,the optimal behavior occurs where ordering costs and carrying costs are equal to one another.Provide an example of a model where this rule does not hold;explain how the model's results are optimal anyway.

Accepted Answer

This rule will not hold in all instances

Question 3

A product has a demand of 4000 units per year.Ordering cost is $20,and holding cost is $4 per unit per year.The EOQ model is appropriate.The cost-minimizing solution for this product will cost ________ per year in total annual inventory (holding and setup)costs.

Accepted Answer

A) $400 
B) $800 
C) $1200 
D) Zero;this is a class C item. 
E) Cannot be determined because the unit price is not known. 
A) $400 
B) $800 
C) $1200 
D) Zero;this is a class C item. 
E) Cannot be determined because the unit price is not known.

Question 4

An advantage of the fixed-period inventory system is that:

Accepted Answer

A) safety stock will be lower than it would be under a fixed-quantity inventory system. 
B) there is no physical count of inventory items when an item is withdrawn. 
C) no inventory records are required. 
D) orders usually are for smaller order quantities. 
E) the average inventory level is reduced. 
A) safety stock will be lower than it would be under a fixed-quantity inventory system. 
B) there is no physical count of inventory items when an item is withdrawn. 
C) no inventory records are required. 
D) orders usually are for smaller order quantities. 
E) the average inventory level is reduced.

Question 5

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

Accepted Answer

The firm should order 250 units at a tim

Question 6

In a safety stock problem where both demand and lead time are variable,demand averages 150 units per day with a daily standard deviation of 16,and lead time averages 5 days with a standard deviation of 1 day.What is the standard deviation of demand during lead time?

Accepted Answer

A) 15 units 
B) 100 units 
C) 154 units 
D) 500 units 
E) 13,125 units 
A) 15 units 
B) 100 units 
C) 154 units 
D) 500 units 
E) 13,125 units

Question 7

The EOQ model is best suited for items whose demand is dependent on other products.

Accepted Answer

A) True 
 B)False

Question 8

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

Accepted Answer

A) a stockout can occur during the review period as well as during the lead time. 
B) this model is used for products that have large standard deviations of demand. 
C) this model is used for products that require very high service levels. 
D) replenishment is not instantaneous. 
E) setup costs and holding costs are large. 
A) a stockout can occur during the review period as well as during the lead time. 
B) this model is used for products that have large standard deviations of demand. 
C) this model is used for products that require very high service levels. 
D) replenishment is not instantaneous. 
E) setup costs and holding costs are large.

Question 9

If demand is not uniform and constant,then stockout risks can be controlled by:

Accepted Answer

A) increasing the EOQ. 
B) spreading annual demand over more frequent,but smaller,orders. 
C) raising the selling price to reduce demand. 
D) adding safety stock. 
E) reducing the reorder point. 
A) increasing the EOQ. 
B) spreading annual demand over more frequent,but smaller,orders. 
C) raising the selling price to reduce demand. 
D) adding safety stock. 
E) reducing the reorder point.

Question 10

Which of the following is a requirement of Q systems?

Accepted Answer

A) perpetual inventory system 
B) constant order spacing 
C) variable lead time 
D) constant demand 
E) all of the above 
A) perpetual inventory system 
B) constant order spacing 
C) variable lead time 
D) constant demand 
E) all of the above

Question 11

Milk is stocked at the grocery store each week.At the end of the week unsold milk is reduced in price by 70% and always sells for this lower price instantly.If weekly demand for milk is normally distributed with a mean of 200 gallons and standard deviation of 25 gallons,find the price for which a fresh gallon of milk sells.Assume a service level of 95% and that the store purchases milk for $2 per gallon.

Accepted Answer

Service level = Cs/(Cs + Co).If the sell

Question 12

Identify the typical cost components that constitute ordering costs in inventory systems.

Accepted Answer

Typical components of ordering

Question 13

Inventory that separates various parts of the production process performs a(n)________ function.

Accepted Answer

The answer of Inventory that separates various parts of the...

Question 14

Which of the following is a function of inventory?

Accepted Answer

A) to decouple various parts of the production process 
B) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand 
C) to take advantage of quantity discounts 
D) to hedge against inflation 
E) All of the above are functions of inventory. 
A) to decouple various parts of the production process 
B) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand 
C) to take advantage of quantity discounts 
D) to hedge against inflation 
E) All of the above are functions of inventory.

Question 15

________ is a method for dividing on-hand inventory into three classifications based on annual dollar volume.

Accepted Answer

The answer of ________ is a method for dividing on-hand...

Question 16

Most inventory models attempt to minimize:

Accepted Answer

A) the likelihood of a stockout. 
B) the number of items ordered. 
C) total inventory-based costs. 
D) the number of orders placed. 
E) the safety stock. 
A) the likelihood of a stockout. 
B) the number of items ordered. 
C) total inventory-based costs. 
D) the number of orders placed. 
E) the safety stock.

Question 17

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50.The production order quantity for this problem is approximately 612 units.What is the average inventory for this problem?

Accepted Answer

A) 61 
B) 245 
C) 300 
D) 306 
E) 490 
A) 61 
B) 245 
C) 300 
D) 306 
E) 490

Question 18

Describe ABC inventory analysis in one sentence.Identify three policies that may be based upon the results of an ABC analysis.

Accepted Answer

ABC inventory analysis is a method for d

Question 19

Which of the following statements regarding the reorder point is TRUE?

Accepted Answer

A) The reorder point is that quantity that triggers an action to restock an item. 
B) There is a reorder point even if lead time and demand during lead time are constant. 
C) The reorder point is larger than d × L if safety stock is present. 
D) A shorter lead time implies a smaller reorder point. 
E) All of the above are true. 
A) The reorder point is that quantity that triggers an action to restock an item. 
B) There is a reorder point even if lead time and demand during lead time are constant. 
C) The reorder point is larger than d × L if safety stock is present. 
D) A shorter lead time implies a smaller reorder point. 
E) All of the above are true.

Question 20

Which of the following is an element of inventory holding costs?

Accepted Answer

A) housing costs 
B) material handling costs 
C) investment costs 
D) pilferage,scrap,and obsolescence 
E) All of the above are elements of inventory holding costs. 
A) housing costs 
B) material handling costs 
C) investment costs 
D) pilferage,scrap,and obsolescence 
E) All of the above are elements of inventory holding costs.

Exam 12: Managing Inventory

At the economic order quantity,holding costs are equal to product costs.

In some inventory models,the optimal behavior occurs where ordering costs and carrying costs are equal to one another.Provide an example of a model where this rule does not hold;explain how the model's results are optimal anyway.

A product has a demand of 4000 units per year.Ordering cost is $20,and holding cost is $4 per unit per year.The EOQ model is appropriate.The cost-minimizing solution for this product will cost ________ per year in total annual inventory (holding and setup)costs.

An advantage of the fixed-period inventory system is that:

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

In a safety stock problem where both demand and lead time are variable,demand averages 150 units per day with a daily standard deviation of 16,and lead time averages 5 days with a standard deviation of 1 day.What is the standard deviation of demand during lead time?

The EOQ model is best suited for items whose demand is dependent on other products.

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

If demand is not uniform and constant,then stockout risks can be controlled by:

Which of the following is a requirement of Q systems?

Identify the typical cost components that constitute ordering costs in inventory systems.

Inventory that separates various parts of the production process performs a(n)________ function.

Which of the following is a function of inventory?

________ is a method for dividing on-hand inventory into three classifications based on annual dollar volume.

Most inventory models attempt to minimize:

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50.The production order quantity for this problem is approximately 612 units.What is the average inventory for this problem?

Describe ABC inventory analysis in one sentence.Identify three policies that may be based upon the results of an ABC analysis.

Which of the following statements regarding the reorder point is TRUE?

Which of the following is an element of inventory holding costs?

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