Question 1

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 2

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 3

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 4

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

Accepted Answer

A) True 
 B)False

Question 5

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days?

Accepted Answer

A) 421 
B) 234 
C) 78 
D) 26 
E) 312 
A) 421 
B) 234 
C) 78 
D) 26 
E) 312

Question 6

The fixed-order-quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and, therefore, quicker response to a potential stock out.

Accepted Answer

A) True 
 B)False

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

Fixed-order-quantity inventory models are "event triggered."

Accepted Answer

A) True 
 B)False

Question 9

When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Some inventory situations involve placing orders to cover only one demand period or to cover short-lived items at frequent intervals.

Accepted Answer

A) True 
 B)False

Question 12

A company has recorded the last six days of daily demand on a single product it sells.Those values are 37, 115, 93, 112, 73, and 110.The time from when an order is placed to when it arrives at the company from its vendor is 3 days.Assuming the basic fixed-order-quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)?

Accepted Answer

A) 540 
B) 270 
C) 115 
D) 90 
E) 60 
A) 540 
B) 270 
C) 115 
D) 90 
E) 60

Question 13

The fixed-order-quantity inventory model requires more time to maintain because every addition or withdrawal is logged.

Accepted Answer

A) True 
 B)False

Question 14

The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting backordered inventory.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Which of the following is the set of all cost components that make up the fixed-order-quantity total annual cost (TC) function?

Accepted Answer

A) Annual purchasing cost, annual ordering cost, fixed cost 
B) Annual holding cost, annual ordering cost, unit cost 
C) Annual holding cost, annual ordering cost, annual purchasing cost 
D) Annual lead time cost, annual holding cost, annual purchasing cost 
E) Annual unit cost, annual set up cost, annual purchasing cost 
A) Annual purchasing cost, annual ordering cost, fixed cost 
B) Annual holding cost, annual ordering cost, unit cost 
C) Annual holding cost, annual ordering cost, annual purchasing cost 
D) Annual lead time cost, annual holding cost, annual purchasing cost 
E) Annual unit cost, annual set up cost, annual purchasing cost

Question 17

Which of the following is not a reason to carry inventory?

Accepted Answer

A) To provide a safeguard for variation in raw material delivery time 
B) To take advantage of economic purchase-order size 
C) To maintain independence of operations 
D) To meet variation in product demand 
E) To keep the stock out of the hands of competitors 
A) To provide a safeguard for variation in raw material delivery time 
B) To take advantage of economic purchase-order size 
C) To maintain independence of operations 
D) To meet variation in product demand 
E) To keep the stock out of the hands of competitors

Question 18

If a vendor has correctly used marginal analysis to select its stock levels for the day (as in the newsperson problem in the text), and if the profit resulting from the last unit being sold (Cu) is $0.90 and the loss resulting from that unit if it is not sold (Co) is $0.50, which of the following is the probability of the last unit being sold?

Accepted Answer

A) Greater than 0.357 
B) Greater than 0.400 
C) Greater than 0.556 
D) Greater than 0.678 
E) None of these 
A) Greater than 0.357 
B) Greater than 0.400 
C) Greater than 0.556 
D) Greater than 0.678 
E) None of these

Question 19

Computer inventory systems are often programmed to produce a cycle count notice in which of the following case?

Accepted Answer

A) When the record shows a near maximum balance on hand 
B) When the record shows positive balance but a backorder was written 
C) When quality problems have been discovered with the item 
D) When the item has become obsolete 
E) When the item has been misplaced in the stockroom 
A) When the record shows a near maximum balance on hand 
B) When the record shows positive balance but a backorder was written 
C) When quality problems have been discovered with the item 
D) When the item has become obsolete 
E) When the item has been misplaced in the stockroom

Question 20

When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time?

Accepted Answer

A) Normal variation in shipping time 
B) A shortage of material at the vendor's plant causing backlogs 
C) An unexpected strike at the vendor's plant 
D) A lost order 
E) Redundant ordering systems 
A) Normal variation in shipping time 
B) A shortage of material at the vendor's plant causing backlogs 
C) An unexpected strike at the vendor's plant 
D) A lost order 
E) Redundant ordering systems

Exam 20: Inventory Management

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

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

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.

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

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days?

The fixed-order-quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and, therefore, quicker response to a potential stock out.

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.

Fixed-order-quantity inventory models are "event triggered."

When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

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

Some inventory situations involve placing orders to cover only one demand period or to cover short-lived items at frequent intervals.

The fixed-order-quantity inventory model requires more time to maintain because every addition or withdrawal is logged.

The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting backordered inventory.

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

Which of the following is the set of all cost components that make up the fixed-order-quantity total annual cost (TC) function?

Which of the following is not a reason to carry inventory?

Computer inventory systems are often programmed to produce a cycle count notice in which of the following case?

When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time?

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