Question 1

The demand for automobiles would be considered an independent demand.

Accepted Answer

A) True 
 B)False

Question 2

For a given level of demand, annual holding cost is larger as the order quantity is __________.

Accepted Answer

The answer of For a given level of demand, annual...

Question 3

Which of the following is an element of inventory holding costs?

Accepted Answer

A)  housing costs 
B)  material handling costs 
C)  investment costs 
D)  pilferage, scrap, and obsolescence 
E)  All of the above are elements of inventory holding cost. 
A)  housing costs 
B)  material handling costs 
C)  investment costs 
D)  pilferage, scrap, and obsolescence 
E)  All of the above are elements of inventory holding cost.

Question 4

If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, 90 percent service level will require safety stock of approximately

Accepted Answer

A)  7 units 
B)  10 units 
C)  13 units 
D)  16 units 
E)  26 units 
A)  7 units 
B)  10 units 
C)  13 units 
D)  16 units 
E)  26 units

Question 5

Which category of inventory holding costs is much higher than average for rapid-change industries such as PCs and cell phones?

Accepted Answer

A)  housing costs 
B)  material handling costs 
C)  labor cost 
D)  parts cost 
E)  pilferage, scrap, and obsolescence 
A)  housing costs 
B)  material handling costs 
C)  labor cost 
D)  parts cost 
E)  pilferage, scrap, and obsolescence

Question 6

__________ is a method for dividing on-hand inventory into three classifications based on annual dollar volume.

Accepted Answer

The answer of __________ is a method for dividing on-hand...

Question 7

One function of inventory is to take advantage of quantity discounts.

Accepted Answer

A) True 
 B)False

Question 8

Daily demand for a product is normally distributed with a mean of 200 units and a standard deviation of 20 units. The firm currently uses a reorder point system, with a lead time of 4 days.
a. What safety stock provides a 50% service level?
b. What safety stock provides a 90% service level?
c. What safety stock provides a 99% service level?

Accepted Answer

Standard deviation during lead

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

If a safety stock problem includes parameters for average daily demand, standard deviation of demand, and lead time, then __________ is variable and __________ is constant.

Accepted Answer

The answer of If a safety stock problem includes parameters...

Question 11

Which of the following would not generally be a motive for a firm to hold inventories?

Accepted Answer

A)  to decouple or separate parts of the production process 
B)  to provide a stock of goods that will provide a selection for customers 
C)  to take advantage of quantity discounts 
D)  to minimize holding costs 
E)  All of the above are functions of inventory. 
A)  to decouple or separate parts of the production process 
B)  to provide a stock of goods that will provide a selection for customers 
C)  to take advantage of quantity discounts 
D)  to minimize holding costs 
E)  All of the above are functions of inventory.

Question 12

A printing company estimates that it will require 1,000 reams of a certain type of paper in a given period. The cost of carrying one unit in inventory for that period is 50 cents. The company buys the paper from a wholesaler in the same town, sending its own truck to pick up the orders at a fixed cost of $20.00 per trip. Treating this cost as the order cost, what is the optimum number of reams to buy at one time?
 How many times should lots of this size be bought during this period?
 What is the minimum cost of maintaining inventory on this item for the period?
 Of this total cost, how much is carrying cost and how much is ordering cost?

Accepted Answer

This is an EOQ problem, even though the

Question 13

Which of the following is a requirement of Q systems?

Accepted Answer

A)  perpetual inventory system 
B)  constant order spacing 
C)  variable lead time 
D)  constant demand 
E)  all of the above 
A)  perpetual inventory system 
B)  constant order spacing 
C)  variable lead time 
D)  constant demand 
E)  all of the above

Question 14

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

Accepted Answer

A) True 
 B)False

Question 15

A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is

Accepted Answer

A)  unchanged 
B)  increased by less than 50% 
C)  increased by 50% 
D)  increased by more than 50% 
E)  cannot be determined 
A)  unchanged 
B)  increased by less than 50% 
C)  increased by 50% 
D)  increased by more than 50% 
E)  cannot be determined

Question 16

How would a firm go about determining service level?

Accepted Answer

Service level is a difficult parameter t

Question 17

What is MRO an acronym for?
 What is the function of MRO inventories?

Accepted Answer

MRO inventories are devoted to

Question 18

Given the following data: D=65,000 units per year, S = $120 per setup, P = $5 per unit, and I = 25% per year, calculate the EOQ and calculate annual costs following EOQ behavior.

Accepted Answer

EOQ is 3533 units, for a total cost of $

Question 19

Work-in-process inventory is devoted to maintenance, repair, and operations.

Accepted Answer

A) True 
 B)False

Question 20

How sensitive is the EOQ to variations in demand or costs?

Accepted Answer

The EOQ is relatively insensitive to sma

Exam 15: Inventory Management

The demand for automobiles would be considered an independent demand.

For a given level of demand, annual holding cost is larger as the order quantity is __________.

Which of the following is an element of inventory holding costs?

If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, 90 percent service level will require safety stock of approximately

Which category of inventory holding costs is much higher than average for rapid-change industries such as PCs and cell phones?

__________ is a method for dividing on-hand inventory into three classifications based on annual dollar volume.

One function of inventory is to take advantage of quantity discounts.

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

If a safety stock problem includes parameters for average daily demand, standard deviation of demand, and lead time, then __________ is variable and __________ is constant.

Which of the following would not generally be a motive for a firm to hold inventories?

Which of the following is a requirement of Q systems?

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is

How would a firm go about determining service level?

What is MRO an acronym for? What is the function of MRO inventories?

Given the following data: D=65,000 units per year, S = $120 per setup, P = $5 per unit, and I = 25% per year, calculate the EOQ and calculate annual costs following EOQ behavior.

Work-in-process inventory is devoted to maintenance, repair, and operations.

How sensitive is the EOQ to variations in demand or costs?

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If a safety stock problem includes parameters for average daily demand, standard deviation of demand, and lead time, then is variable and is constant.