Question 1

In a price-break model of lot sizing, the lowest cost quantity is always feasible.

Accepted Answer

A) True 
 B)False

Question 2

What is the name of a physical inventory-taking technique that focuses only on certain items and counts more often than once or twice a year? ______________________________________.

Accepted Answer

cycle counting
Explanation: Cy

Question 3

In making any decision that affects inventory size, which of the following costs do not need to be considered?

Accepted Answer

A) Holding costs 
B) Setup costs 
C) Ordering costs 
D) Fixed costs 
E) Shortage costs 
A) Holding costs 
B) Setup costs 
C) Ordering costs 
D) Fixed costs 
E) Shortage costs

Question 4

A company wants to determine its reorder point (R).Demand is variable and the company wants to build a safety stock into R.The company wants to have a service probability coverage of 95 percent.If average daily demand is 8, lead time is 3 days, and the standard deviation of usage during lead time is 2, which of the following is the desired value of R?

Accepted Answer

A) About 17.9 
B) About 19.7 
C) About 24.0 
D) About 27.3 
E) About 31.2 
A) About 17.9 
B) About 19.7 
C) About 24.0 
D) About 27.3 
E) About 31.2

Question 5

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 6

In making any decision that affects the size of inventory, what are the four categories of cost that must be considered?
(1) __________________________________________
(2) __________________________________________
(3) __________________________________________
(4) __________________________________________.

Accepted Answer

(1 holding (or car rying cost.(2 setup (

Question 7

A company is planning for its financing needs and uses the basic fixed-order-quantity inventory model.Which of the following is the total cost (TC) of the inventory given an annual demand of 10,000, setup cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150?

Accepted Answer

A) $1,501,600 
B) $1,498,200 
C) $500,687 
D) $499,313 
E) None of these 
A) $1,501,600 
B) $1,498,200 
C) $500,687 
D) $499,313 
E) None of these

Question 8

The optimal stocking decision in inventory management, when using marginal analysis, occurs at the point where the benefits derived from carrying the next unit are more than the costs for that unit.

Accepted Answer

A) True 
 B)False

Question 9

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 10

What is the term for there being no relationship between demands for various items? _____________________________________.

Accepted Answer

independent demand
Explanation

Question 11

Price-break models deal with discrete or step changes in price as order size changes rather than a per-unit change.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not one of the categories of manufacturing inventory?

Accepted Answer

A) Raw materials 
B) Finished products 
C) Component parts 
D) Just-in-time 
E) Supplies 
A) Raw materials 
B) Finished products 
C) Component parts 
D) Just-in-time 
E) Supplies

Question 13

Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.

Accepted Answer

A) True 
 B)False

Question 14

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 15

The average cost of inventory in the United States is 20 to 25 percent of its value.

Accepted Answer

A) True 
 B)False

Question 16

You would like to use the fixed-time period inventory model to compute the desired order quantity for a company.You know that vendor lead time is 10 days and the number of days between reviews is 15.Which of the following is the standard deviation of demand over the review and lead time period if the standard deviation of daily demand is 10?

Accepted Answer

A) 25 
B) 40 
C) 50 
D) 73 
E) 100 
A) 25 
B) 40 
C) 50 
D) 73 
E) 100

Question 17

You would like to use the fixed-time-period inventory model to compute the desired order quantity for a company.You know that vendor lead time is 5 days and the number of days between reviews is 7.Which of the following is the standard deviation of demand over the review and lead time if the standard deviation of daily demand is 8?

Accepted Answer

A) About 27.7 
B) About 32.8 
C) About 35.8 
D) About 39.9 
E) About 45.0 
A) About 27.7 
B) About 32.8 
C) About 35.8 
D) About 39.9 
E) About 45.0

Question 18

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

Accepted Answer

A) True 
 B)False

Question 19

Dependent demand inventory levels are usually managed by calculations using calculus-driven, cost-minimizing models.

Accepted Answer

A) True 
 B)False

Question 20

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

Accepted Answer

A) True 
 B)False

Exam 20: Inventory Management

In a price-break model of lot sizing, the lowest cost quantity is always feasible.

What is the name of a physical inventory-taking technique that focuses only on certain items and counts more often than once or twice a year? ______________________________________.

In making any decision that affects inventory size, which of the following costs do not need to be considered?

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?

The optimal stocking decision in inventory management, when using marginal analysis, occurs at the point where the benefits derived from carrying the next unit are more than the costs for that unit.

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.

What is the term for there being no relationship between demands for various items? _____________________________________.

Price-break models deal with discrete or step changes in price as order size changes rather than a per-unit change.

Which of the following is not one of the categories of manufacturing inventory?

Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.

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?

The average cost of inventory in the United States is 20 to 25 percent of its value.

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

Dependent demand inventory levels are usually managed by calculations using calculus-driven, cost-minimizing models.

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

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