Deck 19: Inventory Control Models

Question 1

19)In the EOQ model,if no quantity discounts are allowed,then ______.

A)the unit purchase price of the materials is constant because it is unaffected by the quantity ordered
B)the unit purchase price of the materials varies according to the quantity ordered
C)the unit purchase price of the materials varies according to the quality of the materials
D)the unit purchase price of the materials varies depending on the period when materials are ordered

Answer 1

A

Question 2

3)Independent demand items are ______.

A)products in demand in countries that have declared their independence
B)products whose demand does not depend on demand for other finished products
C)products that are in demand irrespective of the price of the product
D)products that are in demand irrespective of the quality of the product

Answer 2

B

Question 3

20)In the EOQ model,if neither shortages nor quantity discounts are allowed,then the total annual cost expression can be simplified to ______.

A)the product of total annual ordering cost and total annual holding cost
B)the sum of total annual ordering cost and total annual holding cost
C)the difference between total annual ordering cost and total annual holding cost
D)the ratio of total annual ordering cost to total annual holding cost

Answer 3

B

Question 4

8)One of the assumptions of the EPQ (Economic Production Quantity)model is ______.

A)that there are several different products involved
B)that production runs to replenish inventory occur at regular intervals
C)that the lead time for the receipt of orders varies depending on the order
D)that there are large discounts available at higher volumes

Question 5

7)Which of the following is NOT a model used to determine the best order size?

A)the economic order quantity (EOQ)model
B)the economic production quantity (EPQ)model
C)the annual stocking model
D)the quantity discount model

Question 6

12)Dependent demand items are ______.

A)those items whose demand depends on the demand for finished products
B)intermediate products whose demand depends on external marketing conditions
C)raw materials whose demand is determined by external marketing conditions
D)semifinished products whose demand is determined by external marketing conditions

Question 7

17)Which of the following is an assumption of the economic order quantity model?

A)Lead time for the receipt of orders is constant and known.
B)Quantity (or volume)discounts are available.
C)Multiple products are involved.
D)Demand is not known.

Question 8

1)A fundamental question in inventory management is ______.

A)how much to order or produce
B)what product features to offer
C)at what price the product should be sold
D)what sort of packaging is required

Question 9

18)In the EOQ model,if shortages are not allowed,then ______.

A)stock-out costs do not exist
B)stock-out costs are high
C)stock-out costs are low
D)stock-out costs are acceptable

Question 10

6)If we are ordering materials from an outside vendor,then the total inventory-related cost on an annual basis is given by the sum of ______.

A)total annual ordering cost,total annual holding cost,total annual stock-out cost,total annual materials purchase cost
B)total annual setup cost,total annual holding cost,total annual stock-out cost,total annual materials purchase cost
C)total annual ordering cost,total annual holding cost,total annual safety stock cost,total annual materials purchase cost
D)total annual setup cost,total annual holding cost,total annual safety stock cost,total annual materials purchase cost

Question 11

9)One of the assumptions of the EOQ (Economic Production Quantity)model is ______.

A)that there are several different products involved
B)that production runs to replenish inventory occur at regular intervals.
C)that the lead time for the receipt of orders varies depending on the order
D)that there are no quantity discounts available

Question 12

2)Which of the following is NOT a type of inventory control system?

A)continuous review systems
B)periodic review systems
C)single-period systems
D)constant replenishment systems

Question 13

15)With regard to inventory management,EOQ stands for ______.

A)economic order quantity
B)easily ordered quantity
C)electronic ordering quantity
D)everlasting online quantity

Question 14

11)Independent demand items are typically ______.

A)finished products whose demand is determined by external marketing conditions
B)intermediate products whose demand depends on the demand for finished products
C)raw materials whose demand depends on the demand for finished products
D)semifinished products whose demand depends on the demand for finished products

Question 15

16)Which of the following is an assumption of the economic order quantity model?

A)Multiple products are involved.
B)Demand is not known.
C)Shortages are allowed.
D)Quantity ordered is received all at once in a single delivery.

Question 16

4)Which of the following is NOT likely to have independent demand?

A)TVs
B)tires
C)cars
D)iPhones

Question 17

5)If the production schedule calls for assembly of 500 motorcycles,then the 1,000 wheels and 1,000 tires that are required to produce the 500 motorcycles are ______.

A)classified as dependent demand items
B)classified as independent demand items
C)classified as inelastic demand items
D)classified as inelastic supply items

Question 18

13)If we are ordering materials from an outside vendor,then the total inventory-related cost on an annual basis is ______.

A)the sum of (total annual ordering cost)and (total annual holding cost)less the sum of (total annual stock-out cost)and (total annual materials purchase cost)
B)the ratio of the sum of total annual ordering cost and total annual holding cost to the sum of total annual stock-out cost and total annual materials purchase cost
C)the product of the sum of total annual ordering cost and total annual holding cost to the sum of total annual stock-out cost and total annual materials purchase cost
D)the sum of total annual ordering cost + total annual holding cost + total annual stock-out cost + total annual materials purchase cost

Question 19

14)If we are producing the product or component in-house,then the total inventory-related cost on an annual basis is ______.

A)the sum of total annual setup cost and total annual holding cost less the sum of total annual stock-out cost and total annual materials purchase cost
B)the ratio of the sum of total annual setup cost and total annual holding cost to the sum of total annual stock-out cost and total annual materials purchase cost
C)total annual setup cost + total annual holding cost + total annual stock-out cost + total annual materials purchase cost
D)the product of the sum of total annual setup cost and total annual holding cost to the sum of total annual stock-out cost and total annual materials purchase cost

Question 20

10)Which of the following is a difference between the EOQ and the EPQ models?

A)In the EOQ model,additional inventory is received all at once,but not in the EPQ model.
B)In the EOQ model,there are quantity discounts available,but not in the EPQ model.
C)In the EOQ model,lead time is known,but not in the EPQ model.
D)In the EOQ model,shortages are allowed,but not in the EPQ model.

Question 21

40)Which of the following assumptions is true of the EPQ model?

A)The quantity ordered is delivered all at once.
B)There is considerable variation in the lead time.
C)There are no quantity discounts.
D)The lead time is not known.

Question 22

28)Assume that the order quantity is 1000 units,and the holding costs are $5 a unit per year.In this case,______.

A)the average inventory level is 500 units,and the total annual holding costs are $2,500
B)the average inventory level is 1,000 units,and the total annual holding costs are $5,000
C)the average inventory level is 0 units,and the total annual holding costs are $5
D)the average inventory level is 500 units,and the total annual holding costs are $5,000

Question 23

35)A local distributor for a Belgian chocolate manufacturer expects to sell 12,000 cases of chocolate truffles next year.The annual holding costs for the truffles are $16 per case per year.The ordering cost is $60 per order.The distributor operates 320 days a year.In this example,______.

A)the total holding costs are given by 12,000 divided by $16
B)the total holding costs are given by 150 times $16
C)the total holding costs are given by 12,000 times $16
D)the total holding costs are given by 300 divided by $16

Question 24

29)Assume that the annual demand is 10,000 units and the order quantity per order is 1,000 units,then ______.

A)there are 10 orders during the year
B)there is one order placed as soon as existing inventory is consumed
C)there is one order placed at the end of each month
D)this is an indicator that this is not a lean operation

Question 25

39)Which of the following statements is true with regard to EPQ and EOQ?

A)The economic production quantity (EPQ)model was developed in the 1960s.
B)In the EOQ model,the assumption is that the company will produce the items.
C)The EPQ model assumes that the company will order the items from an outside vendor.
D)The EPQ model is an extension of the EOQ model.

Question 26

33)In the economic order quantity model,the time between orders is ______.

A)given by dividing the number of orders by the number of working days in the year
B)given by dividing the demand by the economic order quantity
C)called the length of the order cycle
D)given by the product the number of orders and the number of working days in the year

Question 27

32)The economic order quantity is given by ______.

A)the square root of ((2 times demand times ordering costs)divided by holding costs)
B)the square root of (holding costs divided by (2 times demand times ordering costs))
C)the square of ((2 times demand times ordering costs)divided by holding costs)
D)the square of (holding costs divided by (2 times demand times ordering costs))

Question 28

27)According to the economic order quantity model,if the holding costs are high,then ______.

A)our order quantities will be smaller to keep our annual holding costs low
B)our order quantities will be higher to keep our annual holding costs low
C)this is an indication that the quantity held in inventory is too high
D)this is an indication of poor inventory management

Question 29

34)In the economic order quantity model,ordering at the economic order quantity level implies that ______.

A)the total ordering and holding costs are equal
B)the total ordering costs are higher than the total holding costs
C)the total ordering costs are lower than the total holding costs
D)the total ordering costs are not equal to the total holding costs

Question 30

36)Kraus Department Store,located in Chicago,sells 1,700 coffeemakers per year.The purchase price of each coffeemaker is $70.The ordering cost is $90 per order.The holding cost is 30% of the unit purchase price.In this example,the economic order quantity is given by ______.

A)the square root of ((2 * 1700 * 90)/ 90))
B)the square root of ((2 * 1700 * 90)/ 21))
C)the square of ((2 * 1700 * 90)/ 90))
D)the square of ((2 * 1700 * 90)/ 21))

Question 31

25)In the EOQ model,if our order quantity is greater than the economic order quantity,then ______.

A)the annual holding costs will be the same or lower than the annual ordering costs
B)the annual holding costs will be the same as the annual ordering costs
C)the annual holding costs will be higher than the annual ordering costs
D)the annual holding costs will be lower than the annual ordering costs

Question 32

24)The total annual holding cost is obtained by ______.

A)multiplying the average inventory level during the year by the average holding cost
B)multiplying the inventory level at the end of the year by the holding cost per unit per year
C)multiplying the inventory level at the beginning of the year by the holding cost per unit per year
D)multiplying the average inventory level during the year by the holding cost per unit per year

Question 33

37)Kraus Department Store,located in Chicago,sells 1,700 coffeemakers per year.The purchase price of each coffeemaker is $70.The ordering cost is $90 per order.The holding cost is 30% of the unit purchase price.In this example,the holding costs are ______.

A)approximately $2,167
B)approximately $2,535
C)approximately $4,628
D)none of these

Question 34

38)The total cost in the EOQ is ______.

A)insensitive to minor deviations in the order quantity from the EOQ amount
B)sensitive to minor deviations in the order quantity from the EOQ amount
C)insensitive to major deviations in the order quantity from the EOQ amount
D)sensitive to deviations in the order quantity from the EOQ amount by more than 20%

Question 35

26)In the EOQ model,if our order quantity is less than the economic order quantity,then ______.

A)the annual ordering costs will be the same or lower than the annual holding costs
B)the annual ordering costs will be the same as the annual holding costs
C)the annual ordering costs will be higher than the annual holding costs
D)the annual ordering costs will be lower than the annual holding costs

Question 36

30)A local distributor for a Belgian chocolate manufacturer expects to sell 12,000 cases of chocolate truffles next year.The annual holding costs for the truffles are $16 per case per year.The ordering cost is $60 per order.The distributor operates 320 days a year.Then ______.

A)the EOQ is 200
B)the EOQ is 300
C)the EOQ is 400
D)the EOQ is 500

Question 37

31)A local distributor for a Belgian chocolate manufacturer expects to sell 12,000 cases of chocolate truffles next year.The annual holding costs for the truffles are $16 per case per year.The ordering cost is $60 per order.The distributor operates 320 days a year.Then ______.

A)there will be three orders per month
B)there will be 40 orders per year
C)there will be one order every week
D)there will be two orders every month

Question 38

23)In the EOQ model,determining the optimal order quantity requires us to ______.

A)increase number of orders along with quantity ordered at any time
B)strike a balance between quantity and quality of materials ordered
C)strike a balance between ordering and holding costs
D)increase number of orders depending on the volume discounts provided

Question 39

21)In the EOQ model,the optimal order quantity is the amount at which ______.

A)the total annual ordering costs are at a minimum
B)the total holding costs are at a minimum
C)the sum of the total annual ordering costs and the total annual holding costs is at a minimum
D)the difference between the total annual ordering costs and the total annual holding costs is at a maximum

Question 40

22)In the EOQ model,the optimal order quantity is the amount at which ______.

A)ordering costs and holding costs are inversely related
B)ordering costs and holding costs are directly related
C)ordering costs and stock-out costs are directly related
D)ordering costs and stock-out costs are inversely related

Question 41

47)The EOQ formula considers the ______.

A)ordering costs,holding costs,and quantity discounts
B)holding costs and quantity discounts
C)ordering costs and quantity discounts
D)ordering costs and holding costs

Question 42

41)Which of the following assumptions is FALSE in the EPQ model?

A)Production runs to replenish inventory occur on a continuous basis.
B)Many products are involved.
C)The demand is known and occurs uniformly and continuously throughout the year.
D)Shortages are allowed.

Question 43

45)The setup cost to make carpets is $20 per setup.The holding cost is $1.75 per yard per year,and the annual demand is 12,000 yards of carpet per year.The manufacturing facility operates 300 days,and 120 yards of the carpet are produced per day.In this example,______.

A)the daily demand rate is 12,000/365
B)the daily demand rate is 12,000/300
C)the daily production rate is 12,000/300
D)the daily production rate is 12,000/300

Question 44

54)The setup cost to make carpets is $20 per setup.The holding cost is $1.75 per yard per year,and the annual demand is 12,000 yards of carpet per year.The manufacturing facility operates 300 days,and 120 yards of the carpet are produced per day.What is the total annual setup cost under the economic production quantity policy?

A)$374.17
B)$458.26
C)$561.25
D)$1,122.50

Question 45

56)Which of the following statements is true with regard to the order quantity?

A)If the order quantity in each order is large,then fewer orders will be placed,which will result in lower annual holding costs and annual ordering costs.
B)If the order quantity in each order is small,then more orders will be placed,which will result in lower annual holding costs but higher annual ordering costs.
C)If the order quantity in each order is large,then fewer orders will be placed,which will result in higher annual ordering costs and annual holding costs.
D)If the order quantity in each order is small,the fewer orders will be placed,which will result in lower annual ordering costs but higher holding costs.

Question 46

48)For a certain product,ordering costs are $30 per order,and the holding cost is $15 per case of this product per year.If the projected annual demand is 900 cases,what is the economic order quantity?

A)40 cases
B)50 cases
C)60 cases
D)70 cases

Question 47

55)The optimal order quantity is an amount that minimizes ______.

A)the sum of the total annual ordering costs and the total annual holding costs
B)the total annual holding costs
C)the total annual ordering costs
D)the difference between the total annual ordering costs and the total annual holding costs

Question 48

49)For a particular product,the annual demand is 12,000,the number of working days in the year is 320,and the EOQ is 300.Given this information,which of the following statements is true?

A)The total number of orders per year is 40.
B)The total number of orders per year is 30.
C)The total number of orders per year is 80.
D)The total number of orders per year cannot be calculated.

Question 49

50)For a particular product,the annual demand is 12,000,the number of working days in the year is 320,and the EOQ is 300.Given this information,which of the following statements is true?

A)The time between orders is 6.
B)The time between orders is 7.
C)The time between orders is 8.
D)The time between orders cannot be calculated.

Question 50

43)In the EPQ model,setup costs refer to ______.

A)the labor costs related to preparing the necessary equipment,changing tools and fixtures on the equipment,cleaning,and so forth
B)the labor costs related to ordering materials,receiving materials,and payment on invoices for materials received
C)the labor costs related to transporting and warehousing materials received
D)the labor costs related to inspecting the quality of materials received

Question 51

57)Which of the following statements is true with regard to the order quantity?

A)If the order quantity in each order is large,then fewer orders will be placed,which will result in lower annual ordering costs.
B)If the order quantity in each order is small,then more orders will be placed,which will result in lower annual ordering costs.
C)If the order quantity in each order is large,then fewer orders will be placed,which will result in higher annual ordering costs.
D)If the order quantity in each order is small,the fewer orders will be placed,which will result in lower annual ordering costs.

Question 52

44)In the EPQ model,______.

A)the larger the quantity produced from each production setup,the fewer production runs are needed to meet demand
B)the smaller the quantity produced from each production setup,the fewer production runs are needed to meet demand
C)the larger the quantity produced from each production setup,the fewer production runs are needed to avoid stock outs
D)the smaller the quantity produced from each production setup,the fewer production runs are needed to avoid stock outs

Question 53

53)The setup cost to make carpets is $20 per setup.The holding cost is $1.75 per yard per year,and the annual demand is 12,000 yards of carpet per year.The manufacturing facility operates 300 days,and 120 yards of the carpet are produced per day.What is the total annual holding cost under the economic production quantity policy?

A)$374.17
B)$458.26
C)$561.25
D)$1,122.50

Question 54

51)For a particular product,the total number of orders per year is 40,the number of working days in the year is 320,and the EOQ is 300.Given this information,which of the following statements is true?

A)The time between orders cannot be calculated.
B)The time between orders is 7.
C)The annual demand is 12,000.
D)The annual demand cannot be calculated.

Question 55

60)The equation for economic order quantity shows that if the holding costs are high,then ______.

A)order quantities will be smaller to keep annual holding costs low
B)order quantities will be larger to keep our annual holding costs low
C)order frequency will be smaller to keep our annual holding costs low
D)order frequency will remain the same,as it is not dependent on holding costs

Question 56

46)The economic order quantity (EOQ)model assumes that ______.

A)the unit purchase price of the item remains constant
B)the unit purchase price of the item varies according to quantity ordered
C)the total purchase costs of items ordered varies according to quantity ordered
D)the average purchase costs of items ordered varies according to quantity ordered

Question 57

42)In the EPQ model,if all the assumptions are true,then the total annual cost associated with the inventory is ______.

A)the sum of total annual setup cost and the total annual holding cost
B)the sum of total annual setup cost and the total annual ordering cost
C)the sum of total production cost and the total annual ordering cost
D)the sum of total production cost and the total annual holding cost

Question 58

58)The total annual cost is given by the sum of ordering costs and holding costs.At the lowest total annual cost,______.

A)the total annual ordering cost is less than the total annual holding cost
B)the total annual ordering cost is equal to the total annual holding cost
C)the total annual ordering cost is more than the total annual holding cost
D)the total annual ordering cost is twice the total annual holding cost

Question 59

52)One of the assumptions of the EPQ model is that:

A)The demand varies throughout the year.
B)Shortages are allowed.
C)Quantity discounts vary over time.
D)The quantity ordered is produced incrementally.

Question 60

59)If the order quantity is greater than the EPQ,then ______.

A)the annual holding costs will be higher than the annual setup costs
B)the annual holding costs will be equal to the annual ordering costs
C)the annual holding costs will be lower than the annual ordering costs
D)the annual holding costs will be twice the annual setup costs

Question 61

62)If the order quantity is 1,000 units,and the holding costs are $5 a unit per year,then ______.

A)the average inventory level will be 500
B)the total annual holding cost would be $5,000
C)the average inventory level will be 2,500
D)the total annual holding cost would be $500

Question 62

69)At the optimal order quantity (EOQ),the average inventory level during the year is given by ______.

A)EOQ - 2
B)EOQ / 2
C)EOQ + 2
D)2 x EOQ

Question 63

79)In the EPQ model,the maximum inventory level is given by ______.

A)[Q - (Q/d)× p]
B)[Q + (Q/p)× p]
B)[Q - (Q/p)× d]
C)[Q + (Q/p)× d]

Question 64

77)Given that the production run size is Q,the production rate is p,and the usage rate is d,then the inventory used up or depleted at the end of the production cycle can be calculated as ______.

A)(Q/p)× d
B)(Q/p)
C)(Q/d)× p
D)(Q/d)

Question 65

75)According to the EPQ model,if the production run size is Q and the production rate is p,then the number days of production run is given by ______.

A)Q * p
B)Q / p
C)p / Q
D)p * Q

Question 66

71)In the calculation for the economic order quantity,______.

A)both ordering costs and holding costs are exact values
B)the ordering costs are approximate,but the holding costs are exact values
C)the ordering costs are exact values,but the holding costs are approximate
D)both ordering costs and holding costs are approximate

Question 67

68)At the optimal order quantity (EOQ),the total annual ordering cost is given by ______.

A)(Annual demand * EOQ)/ Ordering cost per order
B)(Annual demand + EOQ)* Ordering cost per order
C)(Annual demand - EOQ)- Ordering cost per order
D)(Annual demand / EOQ)* Ordering cost per order

Question 68

74)According to the EPQ model,the larger the quantity produced from each production setup ______.

A)the fewer production runs are needed to meet demand requirements and the smaller will be the total annual setup cost
B)the more production runs are needed to meet the demand requirements and the smaller will be the total annual setup cost
C)the fewer production runs are needed to meet the demand requirements and the higher will be the total annual setup cost
D)the more production runs are needed to meet demand requirements and the higher will be the total annual setup cost

Question 69

65)If the order quantity per order is 2,000 units,annual demand is 10,000,and cost per order is $50,then which of the following statements is true?

A)There are 15 orders in the year.
B)The average inventory is 1,000 units.
C)The holding cost per unit is $2.50.
D)The total annual holding costs are $25,000 (= $2.50 * 10000).

Question 70

76)Which of the following statements is FALSE if the production run size is Q,the production rate is p,and the demand or usage rate is d?

A)The number days of production run is given by Q/p.
B)Inventory used up at the end of the production cycle is given by (Q/p)× d.
C)Inventory used up at the end of the production cycle is given by (p/Q)× d.
D)The maximum inventory is given by Q x (1-d/p).

Question 71

72)Which of the following statements with regard to the economic production quantity (EPQ)model is FALSE?

A)It was developed in 1918.
B)The EOQ model is based on the EPQ model.
C)It assumes that the company will produce the items.
D)It assumes that lead time is known and is constant.

Question 72

67)At the optimal order quantity (EOQ),the total annual inventory cost (TC)is given by ______.

A)TC = (Annual demand/EOQ)× Ordering cost per order/2 + (EOQ)× Holding cost per unit per year
B)TC = (Annual demand/EOQ)× Ordering cost per order + (EOQ/2)× Holding cost per unit per year
C)TC = (Annual demand/EOQ)× Ordering cost per order/2 + (EOQ/2)× Holding cost per unit per year
D)TC = (Annual Demand/EOQ)× Ordering cost per order + (EOQ)× Holding cost per unit per year

Question 73

66)If you have total annual cost (TAC),total annual setup cost (TASC),total annual holding cost (TAHC),and total annual materials purchase cost (TAMPC),then you can calculate total annual stock-out cost (TASOC)by this formula.

A)TASOC = TAC - TASC - TAHC - TAMPC
B)TASOC = TAC + TASC - TAHC - TAMPC
C)TASOC = TAC + TASC + TAHC - TAMPC
D)TASOC = TAC + TASC - TAHC + TAMPC

Question 74

63)If the order quantity per order is 2,000 units,annual demand is 10,000,and cost per order is $50,then which of the following statements is true?

A)There are five orders in the year.
B)The total annual ordering cost is $2,500.
C)The holding cost per unit is $2.50.
D)The total annual holding costs are $25,000 (= $2.50 * 10,000).

Question 75

80)Average inventory is calculated as the (maximum inventory + minimum inventory)/ 2 in ______.

A)only the EPQ model
B)only the EOQ model
C)both EPQ and EOQ models
D)neither EPQ nor EOQ models

Question 76

70)Which of the following statements is FALSE with regard to holding costs?

A)The holding cost per unit per period is expressed as a percentage of the purchase price (P).
B)The holding cost per unit per period is called the carrying rate.
C)The holding cost per unit per period is called the holding rate.
D)The holding cost per unit per period is expressed as a percentage of ordering costs.

Question 77

78)Given that the production run size is Q,the production rate is p,and the usage rate is d,then the inventory remaining in stock at the end of the production run is ______.

A)[Q - (Q/d)× p]
B)[Q + (Q/p)× p]
B)[Q - (Q/p)× d]
C)[Q + (Q/p)× d]

Question 78

61)Holding costs are a linear function of quantity ordered.This means that ______.

A)these costs increase if the quantity ordered increases and decrease as the quantity ordered decreases
B)these costs increase if the quantity ordered decreases and decrease as the quantity ordered increases
C)these costs remain unchanged as the quantity ordered changes
D)these costs have no relationship with quantity ordered

Question 79

73)The EPQ model assumes units are received incrementally because ______.

A)the supplier is sending units incrementally
B)the company follows a just-in-time strategy for delivery of supplies
C)the units are being produced incrementally
D)items are produced all at once to build up the inventory instantaneously

Question 80

64)If the order quantity per order is 2,000 units,annual demand is 10,000,and cost per order is $50,then which of the following statements is true?

A)There are 50 orders in the year.
B)The total annual ordering cost is $250.
C)The holding cost per unit is $2.50.
D)The total annual holding costs are $25,000 (= $2.50 * 10,000).