Question 1

It is critical that the exact quantity calculated in the EOQ model be ordered.

Accepted Answer

A) True 
 B)False

Question 2

Monitoring inventory turns over time can be used as a measure of performance.

Accepted Answer

A) True 
 B)False

Question 3

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probably be classified as:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
A)  A. 
B)  B. 
C)  C.

Question 4

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

Accepted Answer

A) True 
 B)False

Question 5

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves:

Accepted Answer

A)  line up. 
B)  equal zero. 
C)  do not line up. 
D)  cannot be calculated. 
E)  depend on the percentage assigned. 
A)  line up. 
B)  equal zero. 
C)  do not line up. 
D)  cannot be calculated. 
E)  depend on the percentage assigned.

Question 6

Daily usage is exactly 60 gallons per day. Lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days. What is the standard deviation of demand during lead time?

Accepted Answer

A)  60 times 2 
B)  60 times the square root of 2 
C)  60 times the square root of 10 
D)  60 times 10 
E)  10 times the square root of 2 
A)  60 times 2 
B)  60 times the square root of 2 
C)  60 times the square root of 10 
D)  60 times 10 
E)  10 times the square root of 2

Question 7

The basic EOQ model ignores the purchasing cost.

Accepted Answer

A) True 
 B)False

Question 8

The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the length of an order cycle?

Accepted Answer

A)  .48 days 
B)  2.08 days 
C)  6 days 
D)  8.4 days 
E)  14.4 days 
A)  .48 days 
B)  2.08 days 
C)  6 days 
D)  8.4 days 
E)  14.4 days

Question 9

A quantity discount will lower the reorder point.

Accepted Answer

A) True 
 B)False

Question 10

The objective of inventory management is to minimize the cost of holding inventory.

Accepted Answer

A) True 
 B)False

Question 11

In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately:

Accepted Answer

A)  11. 
B)  20. 
C)  24. 
D)  28. 
E)  375. 
A)  11. 
B)  20. 
C)  24. 
D)  28. 
E)  375.

Question 12

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer.
If he were to order 16 cases of Stein beer at a time, what would be the length of an order cycle?

Accepted Answer

A)  .25 days 
B)  3 days 
C)  1 day 
D)  4 days 
E)  20 days 
A)  .25 days 
B)  3 days 
C)  1 day 
D)  4 days 
E)  20 days

Question 13

Interest, insurance, and opportunity costs are all associated with holding costs.

Accepted Answer

A) True 
 B)False

Question 14

The rate of demand is an important factor in determining the ROP.

Accepted Answer

A) True 
 B)False

Question 15

A nonlinear cost related to order size is the cost of:

Accepted Answer

A)  interest. 
B)  insurance. 
C)  taxes. 
D)  ordering. 
E)  space. 
A)  interest. 
B)  insurance. 
C)  taxes. 
D)  ordering. 
E)  space.

Question 16

Lead time is exactly 20 days long. Daily demand is normally distributed with a mean of 10 gallons per day and a standard deviation of 2 gallons. What is the standard deviation of demand during lead time?

Accepted Answer

A)  20 times 2 
B)  20 times 10 
C)  2 times the square root of 20 
D)  2 times the square root of 10 
E)  400 times the square root of 10 
A)  20 times 2 
B)  20 times 10 
C)  2 times the square root of 20 
D)  2 times the square root of 10 
E)  400 times the square root of 10

Question 17

In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve.

Accepted Answer

A) True 
 B)False

Question 18

If no variations in demand or lead time exist, the ROP will equal:

Accepted Answer

A)  the EOQ. 
B)  expected usage during lead timE. 
C)  safety stock. 
D)  the service level. 
E)  the EOQ plus safety stock. 
A)  the EOQ. 
B)  expected usage during lead timE. 
C)  safety stock. 
D)  the service level. 
E)  the EOQ plus safety stock.

Question 19

Decoupling operations means to break the linkage between two sequential operations.

Accepted Answer

A) True 
 B)False

Question 20

Which item would be least likely to be ordered under a fixed-order-interval system?

Accepted Answer

A)  textbooks at a college bookstore 
B)  auto parts at an assembly plant 
C)  cards at a gift shop 
D)  canned peas at a supermarket 
E)  magazines at a news stand 
A)  textbooks at a college bookstore 
B)  auto parts at an assembly plant 
C)  cards at a gift shop 
D)  canned peas at a supermarket 
E)  magazines at a news stand

Exam 18: Inventory Management

It is critical that the exact quantity calculated in the EOQ model be ordered.

Monitoring inventory turns over time can be used as a measure of performance.

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probably be classified as:

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves:

Daily usage is exactly 60 gallons per day. Lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days. What is the standard deviation of demand during lead time?

The basic EOQ model ignores the purchasing cost.

A quantity discount will lower the reorder point.

The objective of inventory management is to minimize the cost of holding inventory.

In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately:

Interest, insurance, and opportunity costs are all associated with holding costs.

The rate of demand is an important factor in determining the ROP.

A nonlinear cost related to order size is the cost of:

Lead time is exactly 20 days long. Daily demand is normally distributed with a mean of 10 gallons per day and a standard deviation of 2 gallons. What is the standard deviation of demand during lead time?

In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve.

If no variations in demand or lead time exist, the ROP will equal:

Decoupling operations means to break the linkage between two sequential operations.

Which item would be least likely to be ordered under a fixed-order-interval system?

Introduction to Operations Management

Competitiveness

Forecasting

Product and Service Design

RELIABILITY – Static

Strategic Capacity Planning for Products and Services

Decision Theory– Static

Process Selection and Facility Layout

Work Design and Measurement

learning curve– Static

Location Planning and Analysis

The Transportation Model– Static

Management of Quality

Quality Control

Acceptance Sampling– Static

Aggregate Planning and Master Scheduling

MRP and ERP

JIT and Lean Operations

Maintenance– Static

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

Filters