Question 1

Which of the following is a disadvantage of carrying too much inventory?

Accepted Answer

A)  it creates an unnecessary waste of scarce resources. 
B)  it leads to higher annual inventory ordering costs. 
C)  it leads to lower average finished goods inventories. 
D)  it increases the need to purchase items. 
E)  it reduces the need to conduct cycle counts. 
A)  it creates an unnecessary waste of scarce resources. 
B)  it leads to higher annual inventory ordering costs. 
C)  it leads to lower average finished goods inventories. 
D)  it increases the need to purchase items. 
E)  it reduces the need to conduct cycle counts.

Question 2

Which of the following would be considered a dependent demand item?

Accepted Answer

A)  Bicycle tires used to assemble a bicycle 
B)  Televisions 
C)  Furniture 
D)  Retail customers 
A)  Bicycle tires used to assemble a bicycle 
B)  Televisions 
C)  Furniture 
D)  Retail customers

Question 3

Describe the ABC inventory matrix, and how is it used to manage inventory.

Accepted Answer

An ABC inventory matrix is used to assis

Question 4

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Accepted Answer

A) True 
 B)False

Question 5

Dependent demand must be forecasted to be accurate.

Accepted Answer

A) True 
 B)False

Question 6

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

Accepted Answer

A) True 
 B)False

Question 7

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Accepted Answer

A) True 
 B)False

Question 8

Which one of the following statements regarding the economic order quantity (EOQ) is true?

Accepted Answer

A)  The EOQ model combines several different item orders to the same supplier. 
B)  If an order quantity is larger than the EOQ, then the annual holding cost will exceed the annual ordering cost. 
C)  The EOQ model assumes a variable demand pattern. 
D)  When the holding cost rate drops, both the annual holding cost and the EOQ decrease. 
E)  The EOQ is frequently used to determine the optimum shipping quantity. 
A)  The EOQ model combines several different item orders to the same supplier. 
B)  If an order quantity is larger than the EOQ, then the annual holding cost will exceed the annual ordering cost. 
C)  The EOQ model assumes a variable demand pattern. 
D)  When the holding cost rate drops, both the annual holding cost and the EOQ decrease. 
E)  The EOQ is frequently used to determine the optimum shipping quantity.

Question 9

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

Accepted Answer

A) True 
 B)False

Question 10

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

Accepted Answer

A)  2 
B)  13 
C)  32. 
D)  40. 
E)  56. 
A)  2 
B)  13 
C)  32. 
D)  40. 
E)  56.

Question 11

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

Accepted Answer

A) True 
 B)False

Question 12

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?

Accepted Answer

A)  Annual order-processing cost 
B)  Annual purchase cost of goods 
C)  Annual capital cost 
D)  Annual setup costs 
E)  Annual total costs 
A)  Annual order-processing cost 
B)  Annual purchase cost of goods 
C)  Annual capital cost 
D)  Annual setup costs 
E)  Annual total costs

Question 13

Which one of the following is NOT a reason for firms to carry inventory?

Accepted Answer

A)  To meet variations in product demand 
B)  To increase production change/setup costs 
C)  To allow for production scheduling flexibility 
D)  To take advantage of quantity discounts 
E)  To maintain independence of operations 
A)  To meet variations in product demand 
B)  To increase production change/setup costs 
C)  To allow for production scheduling flexibility 
D)  To take advantage of quantity discounts 
E)  To maintain independence of operations

Question 14

When demand and delivery lead time are known and constant, the reorder point is the ____.

Accepted Answer

A)  demand during the delivery lead time 
B)  safety stock 
C)  demand during lead time + safety stock 
D)  economic order quantity 
E)  average inventory 
A)  demand during the delivery lead time 
B)  safety stock 
C)  demand during lead time + safety stock 
D)  economic order quantity 
E)  average inventory

Question 15

Cycle counting means to physically count inventory on a periodic basis.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is NOT an assumption of the economic order quantity (EOQ) model?

Accepted Answer

A)  Demand is known, constant, and independent. 
B)  Lead time is known and constant. 
C)  Quantity discounts are not possible. 
D)  Production and use occur simultaneously. 
E)  The only variable costs are setup cost and holding cost. 
A)  Demand is known, constant, and independent. 
B)  Lead time is known and constant. 
C)  Quantity discounts are not possible. 
D)  Production and use occur simultaneously. 
E)  The only variable costs are setup cost and holding cost.

Question 17

The manager at Robert's Cigars wants to determine the lowest cost order policy given the following purchase discounts offered: cigar costs are $4 each for orders less than 500; $3.50 each for orders of 500 - 1000; and $3.25 each for orders greater than 1000.The order cost = $75, annual demand forecast = 5500 cigars, inventory carrying cost = 30% per year.

Accepted Answer

Step 1
Determine the 3 EOQ’s—
For $4 cig

Question 18

The primary purpose of the basic economic order quantity (EOQ) model is to:

Accepted Answer

A)  Calculate the reorder point, so that replenishments take place at the proper time 
B)  Minimize the sum of purchase cost and holding cost 
C)  Maximize the customer service level 
D)  Calculate the optimum safety stock level 
E)  None of the above 
A)  Calculate the reorder point, so that replenishments take place at the proper time 
B)  Minimize the sum of purchase cost and holding cost 
C)  Maximize the customer service level 
D)  Calculate the optimum safety stock level 
E)  None of the above

Question 19

List five of the assumptions of the EOQ model.

Accepted Answer

a.Demand must be known and constant
b.De

Question 20

Independent demand is the:

Accepted Answer

A)  Internal demand for all end-item parts and materials. 
B)  Demand for a firm's end products. 
C)  Forecasted demand for purchased items. 
D)  Absolute demand for all items. 
A)  Internal demand for all end-item parts and materials. 
B)  Demand for a firm's end products. 
C)  Forecasted demand for purchased items. 
D)  Absolute demand for all items.

Which of the following is a disadvantage of carrying too much inventory?

Which of the following would be considered a dependent demand item?

Describe the ABC inventory matrix, and how is it used to manage inventory.

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Dependent demand must be forecasted to be accurate.

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Which one of the following statements regarding the economic order quantity (EOQ) is true?

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?

Which one of the following is NOT a reason for firms to carry inventory?

When demand and delivery lead time are known and constant, the reorder point is the ____.

Cycle counting means to physically count inventory on a periodic basis.

Which of the following is NOT an assumption of the economic order quantity (EOQ) model?

The primary purpose of the basic economic order quantity (EOQ) model is to:

List five of the assumptions of the EOQ model.

Independent demand is the:

Introduction to Supply Chain Management

Purchasing Management

Creating and Managing Supplier Relationships

Ethical and Sustainable Sourcing

Demand Forecasting

Resource Planning Systems

Process Management: Lean and Six Sigma in the Supply Chain

Domestic U.S.and Global Logistics

Customer Relationship Management

Global Location Decisions

Service Response Logistics

Supply Chain Process Integration

Performance Measurement Along the Supply Chain

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Exam 7: Inventory Management

Which of the following is a disadvantage of carrying too much inventory?

Which of the following would be considered a dependent demand item?

Describe the ABC inventory matrix, and how is it used to manage inventory.

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Dependent demand must be forecasted to be accurate.

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Which one of the following statements regarding the economic order quantity (EOQ) is true?

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?

Which one of the following is NOT a reason for firms to carry inventory?

When demand and delivery lead time are known and constant, the reorder point is the ____.

Cycle counting means to physically count inventory on a periodic basis.

Which of the following is NOT an assumption of the economic order quantity (EOQ) model?

The primary purpose of the basic economic order quantity (EOQ) model is to:

List five of the assumptions of the EOQ model.

Independent demand is the:

Introduction to Supply Chain Management

Purchasing Management

Creating and Managing Supplier Relationships

Ethical and Sustainable Sourcing

Demand Forecasting

Resource Planning Systems

Process Management: Lean and Six Sigma in the Supply Chain

Domestic U.S.and Global Logistics

Customer Relationship Management

Global Location Decisions

Service Response Logistics

Supply Chain Process Integration

Performance Measurement Along the Supply Chain

Filters