Question 1

The following information is available for Wilson Trailer Company, which sells two products:
$\begin{array}{lcc}
&\text { Trailer A } &\text { Trailer B} \
\text { Processing time } & 2 \text { hours } & 4 \text { hours } \
\text { Vinyl cover used } & 16 \mathrm{sq} \cdot \mathrm{m} . & 12 \mathrm{sq} . \mathrm{m} . \
\text { Selling price } & \$ 50.00 & \$ 80.00 \
\text { Variable cost } & \$ 35.00 & \$ 50.00 \
\text { Fixerl cost } & \$ 10.00 & \$ 20.00
\end{array}$ There are 100 hours available in the plant and 75 square metres of vinyl available per operating period.
-Refer to the figure.What is the constraint equation representing the materials available for the production processes?

Accepted Answer

A) 2A + 4B $\geq $ 100 
B) 2A + 4B = 200 
C) 16A + 12B = 75 
D) 16A + 12B $\leq $ 75

Question 2

Air Frame Corporation increased the size of several inventory order quantities that had previously been determined using the EOQ model.What is the impact on the total annual ordering costs?

Accepted Answer

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

Question 3

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 cost of placing an order?

Accepted Answer

A) $2 
B) $8 
C) $25 
D) $200

Question 4

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.The company operates 200 days a year,the lead time for the item is 10 days,and the safety stock is 100 units.What is the reorder point?

Accepted Answer

A) 70 units 
B) 100 units 
C) 170 units 
D) 1,000 units

Question 5

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.If demand remains the same,what is the impact on the number of orders made during the year?

Accepted Answer

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

Question 6

Smith Products Corporation produces two products.The manufacture of these products is partially automated.Total available labour hours are 400,and the total available machine hours are 600.Time requirements and contribution margins per unit for each product are as follows:
 $\begin{array}{lcc}
& \text { Praduct X } & \text { Praduct Y } \
\text { Labour hours } & 2 & 3 \
\text { Machine hours } & 4 & 2 \
\text { Contribution margin per unit } & \$ 5 & \$ 4
\end{array}$ 
a.What is the equation to be maximized?
b.What are the equations that express the constraints?
c.What is the greatest number of units of A that can be produced given the constraints?
d.What is the optimal solution?

Accepted Answer

The answer of Smith Products Corporation produces two products.The manufacture...

Question 7

A linear programming problem has an objective function of 10X + 12Y.If the optimal solution provided by the model is to produce and sell 400 units of X and 1,000 units of Y,what is the expected return?

Accepted Answer

A) $1,400 
B) $14,800 
C) $16,000 
D) $40,800

Question 8

How are the objectives of JIT achieved?

Accepted Answer

A) by controlling costs,improving delivery performance,increasing quality costs 
B) by controlling costs,increasing delivery times,improving quality 
C) by controlling prices,improving delivery performance,improving quality 
D) by controlling costs,improving delivery performance,improving quality

Question 9

Hassel Company manufactures two different products, X and Y. The company has 100 kilograms of materials and 300 direct labour hours available for production.
The time requirements and contribution margins per unit are as follows:
$\begin{array}{lcc}
&\text {Product X}&\text {Product Y}\
\text { Contribution margin per unit } & \$ 4 & \$ 5 \
\text { Materials per unit (kg) } & 1 & 2 \
\text { Direct labour hours per unit } & 4 & 2
\end{array}$
-Refer to the figure.What is the objective function for maximizing profits?

Accepted Answer

A) Maximize $1X + $2Y 
B) Maximize $4X + $2Y 
C) Maximize $4X + $5Y 
D) Minimize $4X + $5Y

Question 10

Which of the following is a carrying cost?

Accepted Answer

A) cost of funds tied up in inventory 
B) cost of processing an order 
C) cost of preparing equipment for production 
D) cost of idled production facilities

Question 11

One of the traditional reasons for holding inventory is to take advantage of quantity discounts and hedge against future price increases.What is the JIT solution meant to do?

Accepted Answer

A) reduce setup costs 
B) reduce lead time 
C) use long-term contracts with suppliers 
D) use total quality control

Question 12

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

Accepted Answer

A) 0.83 days 
B) 6.67 days 
C) 8.00 days 
D) 40 days

Question 13

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:
$$\begin{array} { l c c c } 
 & \text { Product A } & \text { Praduct B } \
\text { Labour hours per unit }& 5 & 2 \
\text { Machine hours per unit }  & 1 & 4
\end{array}$$
-Refer to the figure.What is the constraint on labour hours for Heft Company?

Accepted Answer

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

Question 14

Which of the following is not a cost readily identified with inventory management?

Accepted Answer

A) cost of selling inventory 
B) cost of not having stock on hand 
C) cost of holding inventory 
D) cost of acquiring inventory

Question 15

Which of the following would be included in a linear programming model?

Accepted Answer

A) independent variables,dependant variables,and objective function 
B) independent variables,networks,and objective function 
C) independent variables,dependant variables,and networks 
D) networks,dependant variables,and objective function

Question 16

Which of the following is NOT a step in the methodology for improving performance under the theory of constraints?

Accepted Answer

A) exploit the binding constraints 
B) subordinate everything else to the decisions made to exploit binding constraints 
C) elevate the organization's binding constraints 
D) analyze the product mix

Question 17

What is the term for the cost of holding inventory?

Accepted Answer

A) ordering cost 
B) setup cost 
C) stock-out cost 
D) carrying cost

Question 18

What is the term for a marker or card that specifies the quantity that the preceding process should manufacture?

Accepted Answer

A) a production Kanban 
B) a vendor Kanban 
C) a withdrawal Kanban 
D) a deposit Kanban

Question 19

Which of the following is considered an ordering cost?

Accepted Answer

A) insurance on the inventory 
B) the opportunity cost of funds invested in inventory 
C) storage costs 
D) unloading costs

Question 20

What does a withdrawal Kanban specify?

Accepted Answer

A) how much should be produced to replace inventory 
B) the quantity that a subsequent process should withdraw from the preceding process 
C) when customers should be notified to pick up orders 
D) when suppliers should be notified to deliver more parts

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

Air Frame Corporation increased the size of several inventory order quantities that had previously been determined using the EOQ model.What is the impact on the total annual ordering costs?

Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.If demand remains the same,what is the impact on the number of orders made during the year?

A linear programming problem has an objective function of 10X + 12Y.If the optimal solution provided by the model is to produce and sell 400 units of X and 1,000 units of Y,what is the expected return?

How are the objectives of JIT achieved?

Which of the following is a carrying cost?

One of the traditional reasons for holding inventory is to take advantage of quantity discounts and hedge against future price increases.What is the JIT solution meant to do?

Which of the following is not a cost readily identified with inventory management?

Which of the following would be included in a linear programming model?

Which of the following is NOT a step in the methodology for improving performance under the theory of constraints?

What is the term for the cost of holding inventory?

What is the term for a marker or card that specifies the quantity that the preceding process should manufacture?

Which of the following is considered an ordering cost?

What does a withdrawal Kanban specify?