Question 1

Which of the following is usually included as an inventory holding cost?

Accepted Answer

A)  Order placing 
B)  Breakage 
C)  Typing up an order 
D)  Quantity discounts 
E)  Annualized cost of materials 
A)  Order placing 
B)  Breakage 
C)  Typing up an order 
D)  Quantity discounts 
E)  Annualized cost of materials

Question 2

A Q-model requires more inventory than does a P-model.

Accepted Answer

A) True 
 B)False

Question 3

A Q-model has variable order quantities while a P-model has fixed order quantities.

Accepted Answer

A) True 
 B)False

Question 4

The standard fixed-time period model assumes that inventory is never counted but determined by EOQ measures.

Accepted Answer

A) True 
 B)False

Question 5

If the cost to change from producing one product to producing another were zero, the lot size would be very small.

Accepted Answer

A) True 
 B)False

Question 6

Using the ABC classification system for inventory, which of the following is a true statement?

Accepted Answer

A)  The C items are of moderate dollar volume. 
B)  You should allocate about 50 percent of the dollar volume to B items. 
C)  The A items are of low dollar volume. 
D)  The A items are of high dollar volume. 
E)  Inexpensive and low usage items are classified as C no matter how critical. 
A)  The C items are of moderate dollar volume. 
B)  You should allocate about 50 percent of the dollar volume to B items. 
C)  The A items are of low dollar volume. 
D)  The A items are of high dollar volume. 
E)  Inexpensive and low usage items are classified as C no matter how critical.

Question 7

The key difference between a fixed-order quantity inventory model where demand is known and one where demand is uncertain is in computing the reorder point.

Accepted Answer

A) True 
 B)False

Question 8

The fixed-order quantity inventory model favors less expensive items because average inventory is lower.

Accepted Answer

A) True 
 B)False

Question 9

It takes more time to maintain a Q-model than it does a P-model.

Accepted Answer

A) True 
 B)False

Question 10

If annual demand is 12,000 units, the ordering cost is $6 per order, and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Accepted Answer

A)  576 
B)  240 
C)  120.4 
D)  60.56 
E)  56.03 
A)  576 
B)  240 
C)  120.4 
D)  60.56 
E)  56.03

Question 11

Which of the following is a fixed-time-period inventory model?

Accepted Answer

A)  The EOQ model 
B)  The least cost method 
C)  The Q-model 
D)  Periodic system model 
E)  Just-in-time model 
A)  The EOQ model 
B)  The least cost method 
C)  The Q-model 
D)  Periodic system model 
E)  Just-in-time model

Question 12

Fixed-order quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

Accepted Answer

A) True 
 B)False

Question 13

If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Accepted Answer

A)  909 
B)  707 
C)  634 
D)  500 
E)  141 
A)  909 
B)  707 
C)  634 
D)  500 
E)  141

Question 14

Using the fixed-order-quantity model, which of the following is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80, and a holding cost per unit per year of $4?

Accepted Answer

A)  $849 
B)  $1,200 
C)  $1,889 
D)  $2,267 
E)  $2,400 
A)  $849 
B)  $1,200 
C)  $1,889 
D)  $2,267 
E)  $2,400

Question 15

The "sawtooth effect," named after turn around artist Al "Chainsaw" Dunlap, is the severe reduction of inventory and service levels that occurs when a firm has gone through a hostile takeover.

Accepted Answer

A) True 
 B)False

Question 16

A Q-model places orders at regular time intervals while a P-model places orders irregularly.

Accepted Answer

A) True 
 B)False

Question 17

In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment.

Accepted Answer

A) True 
 B)False

Question 18

One of the basic purposes of inventory analysis in manufacturing and stock keeping services is to determine how large the orders to vendors should be.

Accepted Answer

A) True 
 B)False

Question 19

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price.

Accepted Answer

A) True 
 B)False

Question 20

Fixed-order quantity inventory systems determine the reorder point, R, and the order quantity, Q, values.

Accepted Answer

A) True 
 B)False

Exam 20: Inventory Management

Which of the following is usually included as an inventory holding cost?

A Q-model requires more inventory than does a P-model.

A Q-model has variable order quantities while a P-model has fixed order quantities.

The standard fixed-time period model assumes that inventory is never counted but determined by EOQ measures.

If the cost to change from producing one product to producing another were zero, the lot size would be very small.

Using the ABC classification system for inventory, which of the following is a true statement?

The key difference between a fixed-order quantity inventory model where demand is known and one where demand is uncertain is in computing the reorder point.

The fixed-order quantity inventory model favors less expensive items because average inventory is lower.

It takes more time to maintain a Q-model than it does a P-model.

If annual demand is 12,000 units, the ordering cost is $6 per order, and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Which of the following is a fixed-time-period inventory model?

Fixed-order quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Using the fixed-order-quantity model, which of the following is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80, and a holding cost per unit per year of $4?

The "sawtooth effect," named after turn around artist Al "Chainsaw" Dunlap, is the severe reduction of inventory and service levels that occurs when a firm has gone through a hostile takeover.

A Q-model places orders at regular time intervals while a P-model places orders irregularly.

In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment.

One of the basic purposes of inventory analysis in manufacturing and stock keeping services is to determine how large the orders to vendors should be.

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price.

Fixed-order quantity inventory systems determine the reorder point, R, and the order quantity, Q, values.

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