Question 1

In the EOQ model, the average inventory per cycle over many cycles is Q/2.

Accepted Answer

A) True 
 B)False

Question 2

If an item's per-unit backorder cost is greater than its per-unit holding cost, no intentional shortage should be planned.

Accepted Answer

A) True 
 B)False

Question 3

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

Accepted Answer

A) the Q* to increase. 
B) the maximum inventory level to increase. 
C) the order cycle to decrease. 
D) annual holding cost to be less than annual setup cost. 
A) the Q* to increase. 
B) the maximum inventory level to increase. 
C) the order cycle to decrease. 
D) annual holding cost to be less than annual setup cost.

Question 4

The Super Discount store (open 24 hours a day, every day) sells 8-packs of paper towels, at the rate of approximately 420 packs per week. Because the towels are so bulky, the annual cost to carry them in inventory is estimated at $.50. The cost to place an order for more is $20 and it takes four days for an order to arrive.
a.Find the optimal order quantity.
b.What is the reorder point?
c.How often should an order be placed?

Accepted Answer

a.Q* = 1322
b.r = (6

Question 5

The economic production lot size model is appropriate when

Accepted Answer

A) demand exceeds the production rate. 
B) there is a constant supply rate for every period, without pause. 
C) ordering cost is equivalent to the production setup cost. 
D) All of the alternatives are correct. 
A) demand exceeds the production rate. 
B) there is a constant supply rate for every period, without pause. 
C) ordering cost is equivalent to the production setup cost. 
D) All of the alternatives are correct.

Question 6

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not implied when average inventory is Q/2, where Q is the order quantity?

Accepted Answer

A) An entire order quantity arrives at one time. 
B) The previous order quantity is entirely depleted when the next order arrives. 
C) An order quantity is depleted at a uniform rate over time. 
D) Backorders are permitted. 
A) An entire order quantity arrives at one time. 
B) The previous order quantity is entirely depleted when the next order arrives. 
C) An order quantity is depleted at a uniform rate over time. 
D) Backorders are permitted.

Question 8

Show the total cost expression and calculate the EOQ for an item with holding cost rate 18%, unit cost $8.00, annual demand of 40000, and ordering cost of $48.

Accepted Answer

TC = (1/2)

Question 9

The time between placing orders is the lead time.

Accepted Answer

A) True 
 B)False

Question 10

The Tiernan Gallery and Art Museum distributes to its visitors a printed guide to its collections. There are about 18000 visitors per year. Holding costs for the brochures are 20% and it costs $30 to place an order with the printer. The printer has offered the following discount schedule: $$\begin{array} { c c c } 
\text { Category } & \text { Order Size } & \text { Unit Cost } \
\hline 1 & 0 - 1499 & \$ 2.50 \
2 & 1500 - 2999 & \$ 2.20 \
3 & 3000 \text { and over } & \$ 1.80
\end{array}$$ How many brochures should be printed at a time?

Accepted Answer

EOQ₃ = 1732.1 (raise to 3000) E

Question 11

A gourmet food store uses a one-week periodic review system for its supply of coffee beans. There is a five-day lead time for orders, and the store will allow two stockouts per year.
a.What is the probability of a stockout associated with each replenishment decision?
b.What is the replenishment level if demand during the review and lead-time periods is normally distributed with mean 120 pounds and standard deviation 8 pounds?
c.How many pounds of beans should be ordered if there are 42 pounds of beans on hand?

Accepted Answer

a.2/52 = .0385
b.M =

Question 12

The EOQ model is insensitive to small variations or errors in the cost estimates.

Accepted Answer

A) True 
 B)False

Question 13

Inventory models in which the rate of demand is constant are called

Accepted Answer

A) fixed models. 
B) deterministic models. 
C) JIT models. 
D) requirements models. 
A) fixed models. 
B) deterministic models. 
C) JIT models. 
D) requirements models.

Question 14

For the inventory model with planned shortages, the optimal order quantity results in

Accepted Answer

A) annual holding cost = annual ordering cost. 
B) annual holding cost = annual backordering cost. 
C) annual ordering cost = annual holding cost + annual backordering cost. 
D) annual ordering cost = annual holding cost - annual backordering cost. 
A) annual holding cost = annual ordering cost. 
B) annual holding cost = annual backordering cost. 
C) annual ordering cost = annual holding cost + annual backordering cost. 
D) annual ordering cost = annual holding cost - annual backordering cost.

Question 15

Inventory

Accepted Answer

A) is held against uncertain usage so that a supply of items is available if needed. 
B) constitutes a small part of the cost of doing business. 
C) is not something that can be managed effectively. 
D) All of the alternatives are correct. 
A) is held against uncertain usage so that a supply of items is available if needed. 
B) constitutes a small part of the cost of doing business. 
C) is not something that can be managed effectively. 
D) All of the alternatives are correct.

Question 16

What are the two most critical behaviors of an inventory system you need to recognize in order to apply the best model?

Accepted Answer

The two most critical behaviors of an in

Question 17

An office supply store open 5 days a week must determine the best inventory policy for boxes of copier paper. Weekly demand is nearly constant at 250 boxes and when orders are placed, then entire shipment arrives at once. The cost per box is $22 and the inventory holding cost is 30%. Orders are placed at a cost of $40 each, including preparation time and communication charges, and the lead time is 2 days.
a.Find the optimal order quantity.
b.What is the reorder point?
c.How often should an order be placed?
d.What is the cycle time?

Accepted Answer

a.Q* = 397
b.TC = .5

Question 18

Zip Games purchases blank 3.5-inch disks onto which it copies its software for sale through its mail order operation. A disk costs Zip $.20. Processing an order for more disks cost $15. Zip uses 60000 disks annually, and the company has a 25% cost of capital.
a.Find the optimal order quantity.
b.How many orders are placed annually?
c.How frequently will orders be placed?

Accepted Answer

a.Q* = 6000
b.10 ord

Question 19

A weekly sports magazine publishes a special edition for the World Series. The sales forecast is for the number of copies to be normally distributed with mean 800,000 copies and standard deviation 60,000 copies. It costs $.35 to print a copy, and the newsstand price is $1.95. Unsold copies will be scrapped. How many copies should be printed?

Accepted Answer

P(demand < Q*) = 1.6

Question 20

For inventory systems with constant demand and a fixed lead time,

Accepted Answer

A) the reorder point = lead-time demand. B) the reorder point > lead-time demand. C) the reorder point < lead-time demand. D) the reorder point is unrelated to lead-time demand. A) the reorder point = lead-time demand. B) the reorder point > lead-time demand. C) the reorder point < lead-time demand. D) the reorder point is unrelated to lead-time demand.

In the EOQ model, the average inventory per cycle over many cycles is Q/2.

If an item's per-unit backorder cost is greater than its per-unit holding cost, no intentional shortage should be planned.

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

The economic production lot size model is appropriate when

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Which of the following is not implied when average inventory is Q/2, where Q is the order quantity?

Show the total cost expression and calculate the EOQ for an item with holding cost rate 18%, unit cost $8.00, annual demand of 40000, and ordering cost of $48.

The time between placing orders is the lead time.

The EOQ model is insensitive to small variations or errors in the cost estimates.

Inventory models in which the rate of demand is constant are called

For the inventory model with planned shortages, the optimal order quantity results in

Inventory

What are the two most critical behaviors of an inventory system you need to recognize in order to apply the best model?

For inventory systems with constant demand and a fixed lead time,

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance and Operations Management

Advanced Linear Programming Applications

Distribution and Network Problems

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Waiting Line Models

Simulation

Decision Analysis

Multicriteria Decisions

Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters

Exam 10: Inventory Models

In the EOQ model, the average inventory per cycle over many cycles is Q/2.

If an item's per-unit backorder cost is greater than its per-unit holding cost, no intentional shortage should be planned.

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

The economic production lot size model is appropriate when

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Which of the following is not implied when average inventory is Q/2, where Q is the order quantity?

Show the total cost expression and calculate the EOQ for an item with holding cost rate 18%, unit cost $8.00, annual demand of 40000, and ordering cost of $48.

The time between placing orders is the lead time.

The EOQ model is insensitive to small variations or errors in the cost estimates.

Inventory models in which the rate of demand is constant are called

For the inventory model with planned shortages, the optimal order quantity results in

Inventory

What are the two most critical behaviors of an inventory system you need to recognize in order to apply the best model?

For inventory systems with constant demand and a fixed lead time,

Introduction

An Introduction to Linear Programming

Linear Programming: Sensitivity Analysis and Interpretation of Solution

Linear Programming Applications in Marketing, Finance and Operations Management

Advanced Linear Programming Applications

Distribution and Network Problems

Integer Linear Programming

Nonlinear Optimization Models

Project Scheduling: Pertcpm

Waiting Line Models

Simulation

Decision Analysis

Multicriteria Decisions

Forecasting

Markov Processes

Linear Programming: Simplex Method

Simplex-Based Sensitivity Analysis and Duality

Solution Procedures for Transportation and Assignment Problems

Minimal Spanning Tree

Dynamic Programming

Filters