Question 1

In the simple EOQ model, if the carrying cost were to double, the EOQ would also double.

Accepted Answer

A) True 
 B)False

Question 2

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand: Q* =

Accepted Answer

A)  is smaller than the holding cost per unit. 
B)  is zero. 
C)  is one-half of the economic order quantity. 
D)  goes down if the setup cost per order goes up. 
E)  goes down if the holding cost per unit goes down. 
A)  is smaller than the holding cost per unit. 
B)  is zero. 
C)  is one-half of the economic order quantity. 
D)  goes down if the setup cost per order goes up. 
E)  goes down if the holding cost per unit goes down.

Question 3

A disadvantage of the fixed-period inventory system is that:

Accepted Answer

A)  it involves higher ordering costs than the fixed quantity inventory system. 
B)  additional inventory records are required. 
C)  the average inventory level is decreased. 
D)  since there is no count of inventory during the review period, a stockout is possible. 
E)  orders usually are for larger quantities. 
A)  it involves higher ordering costs than the fixed quantity inventory system. 
B)  additional inventory records are required. 
C)  the average inventory level is decreased. 
D)  since there is no count of inventory during the review period, a stockout is possible. 
E)  orders usually are for larger quantities.

Question 4

Consider a supply chain where a retailer orders from a wholesaler who orders from a manufacturer who orders from a supplier. The retailer's monthly standard deviation of demand is 20 units. The standard deviation of orders was 30, 60, 70, and 40 units for the retailer, wholesaler, manufacturer, and supplier, respectively. Which of the following is TRUE?

Accepted Answer

A)  The supplier's bullwhip measure is 0.5714. 
B)  The wholesaler's bullwhip measure is 4. 
C)  The manufacturer is providing a dampening effect. 
D)  The retailer contributes most to the bullwhip effect in the supply chain. 
E)  The wholesaler's bullwhip measure is 2. 
A)  The supplier's bullwhip measure is 0.5714. 
B)  The wholesaler's bullwhip measure is 4. 
C)  The manufacturer is providing a dampening effect. 
D)  The retailer contributes most to the bullwhip effect in the supply chain. 
E)  The wholesaler's bullwhip measure is 2.

Question 5

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

Accepted Answer

A) True 
 B)False

Question 6

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50. The production order quantity for this problem is approximately 750 units. What is the average inventory for this problem?

Accepted Answer

A)  61 
B)  245 
C)  300 
D)  375 
E)  600 
A)  61 
B)  245 
C)  300 
D)  375 
E)  600

Question 7

The items listed below are stored in a one-dock warehouse. In what order should they be placed in the warehouse (moving from closest to the dock to furthest away from the dock)?

Accepted Answer

A)  E-C-B-A-D 
B)  C-A-E-B-D 
C)  A-C-E-D-B 
D)  B-C-D-E-A 
E)  D-A-B-C-E 
A)  E-C-B-A-D 
B)  C-A-E-B-D 
C)  A-C-E-D-B 
D)  B-C-D-E-A 
E)  D-A-B-C-E

Question 8

Which of the following is NOT an assumption of the economic order quantity model shown below? Q* =

Accepted Answer

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

Question 9

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Over which product do you suggest the firm keep the least control?

Accepted Answer

A)  R11 
B)  S22 
C)  T33 
D)  U44 
E)  V55 
A)  R11 
B)  S22 
C)  T33 
D)  U44 
E)  V55

Question 10

Perform an ABC analysis on the following set of products.

Accepted Answer

The table below details the contribution

Question 11

Which of the following statements about quantity discounts is FALSE?

Accepted Answer

A)  The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. 
B)  In inventory management, item cost becomes relevant to order quantity decisions when a quantity discount is available. 
C)  If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule. 
D)  The larger the annual demand, the less attractive a discount schedule will be. 
E)  The smaller the ordering cost, the less attractive a discount schedule will be. 
A)  The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. 
B)  In inventory management, item cost becomes relevant to order quantity decisions when a quantity discount is available. 
C)  If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule. 
D)  The larger the annual demand, the less attractive a discount schedule will be. 
E)  The smaller the ordering cost, the less attractive a discount schedule will be.

Question 12

The primary trade-off in warehouse storage location analysis involves evaluating the number of trips taken for an item vs. the physical weight of that item.

Accepted Answer

A) True 
 B)False

Question 13

In the production order quantity model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a smaller production/order quantity than in an otherwise identical EOQ problem.

Accepted Answer

A) True 
 B)False

Question 14

Describe the difference between a fixed-quantity and a fixed-period inventory system?

Accepted Answer

In a fixed-quantity inventory system, wh

Question 15

________ inventory is material that is usually purchased, but has yet to enter the manufacturing process.

Accepted Answer

The answer of ________ inventory is material that is usually...

Question 16

ABC analysis divides on-hand inventory into three classes, generally based upon which of the following?

Accepted Answer

A)  item quality 
B)  unit price 
C)  the number of units on hand 
D)  annual demand 
E)  annual dollar volume 
A)  item quality 
B)  unit price 
C)  the number of units on hand 
D)  annual demand 
E)  annual dollar volume

Question 17

A product whose EOQ is 40 units experiences an increase in ordering cost from $10 per order to $90 per order. The revised EOQ is:

Accepted Answer

A)  three times as large. 
B)  one-third as large. 
C)  nine times as large. 
D)  one-ninth as large. 
E)  cannot be determined 
A)  three times as large. 
B)  one-third as large. 
C)  nine times as large. 
D)  one-ninth as large. 
E)  cannot be determined

Question 18

What is the primary purpose of the basic economic order quantity model shown below? Q* =

Accepted Answer

A)  to calculate the reorder point, so that replenishments take place at the proper time 
B)  to minimize the sum of carrying cost and holding cost 
C)  to maximize the customer service level 
D)  to minimize the sum of setup cost and holding cost 
E)  to calculate the optimum safety stock 
A)  to calculate the reorder point, so that replenishments take place at the proper time 
B)  to minimize the sum of carrying cost and holding cost 
C)  to maximize the customer service level 
D)  to minimize the sum of setup cost and holding cost 
E)  to calculate the optimum safety stock

Question 19

The primary trade-off in transportation mode analysis involves evaluating ordering cost against the cost of shipping.

Accepted Answer

A) True 
 B)False

Question 20

In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

Accepted Answer

A) True 
 B)False

Exam 11: Inventory Management

In the simple EOQ model, if the carrying cost were to double, the EOQ would also double.

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand: Q* =

A disadvantage of the fixed-period inventory system is that:

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50. The production order quantity for this problem is approximately 750 units. What is the average inventory for this problem?

The items listed below are stored in a one-dock warehouse. In what order should they be placed in the warehouse (moving from closest to the dock to furthest away from the dock)?

Which of the following is NOT an assumption of the economic order quantity model shown below? Q* =

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Over which product do you suggest the firm keep the least control?

Perform an ABC analysis on the following set of products.

Which of the following statements about quantity discounts is FALSE?

The primary trade-off in warehouse storage location analysis involves evaluating the number of trips taken for an item vs. the physical weight of that item.

In the production order quantity model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a smaller production/order quantity than in an otherwise identical EOQ problem.

Describe the difference between a fixed-quantity and a fixed-period inventory system?

________ inventory is material that is usually purchased, but has yet to enter the manufacturing process.

ABC analysis divides on-hand inventory into three classes, generally based upon which of the following?

A product whose EOQ is 40 units experiences an increase in ordering cost from $10 per order to $90 per order. The revised EOQ is:

What is the primary purpose of the basic economic order quantity model shown below? Q* =

The primary trade-off in transportation mode analysis involves evaluating ordering cost against the cost of shipping.

In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

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