Question 1

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 2

In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order-quantity inventory model, which of the following must be computed first?

Accepted Answer

A) Standard deviation of daily demand 
B) Number of standard deviations for a specific service probability 
C) Stock-out cost 
D) Economic order quantity 
E) Safety stock level 
A) Standard deviation of daily demand 
B) Number of standard deviations for a specific service probability 
C) Stock-out cost 
D) Economic order quantity 
E) Safety stock level

Question 3

Which of the following is usually included as an inventory holding cost?

Accepted Answer

A) Order placing 
B) Breakage 
C) Typing up an order 
D) Quantity discounts 
E) Annualized cost of materials 
A) Order placing 
B) Breakage 
C) Typing up an order 
D) Quantity discounts 
E) Annualized cost of materials

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

The "sawtooth effect" is named after the jagged shape of the graph of inventory levels over time.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is a fixed-time-period inventory model?

Accepted Answer

A) The EOQ model 
B) The least cost method 
C) The Q model 
D) Periodic system model 
E) Just-in-time model 
A) The EOQ model 
B) The least cost method 
C) The Q model 
D) Periodic system model 
E) Just-in-time model

Question 7

Price-break models deal with the fact that the selling price of an item varies with the order size.

Accepted Answer

A) True 
 B)False

Question 8

Fixed-order-quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

Accepted Answer

A) True 
 B)False

Question 9

If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Accepted Answer

A) 5,060 
B) 2,320 
C) 2,133 
D) 2,004 
E) 1,866 
A) 5,060 
B) 2,320 
C) 2,133 
D) 2,004 
E) 1,866

Question 10

Which of the following is one of the categories of manufacturing inventory?

Accepted Answer

A) Economic order inventory 
B) Work-in-process 
C) Quality units 
D) JIT inventory 
E) Reorder point 
A) Economic order inventory 
B) Work-in-process 
C) Quality units 
D) JIT inventory 
E) Reorder point

Question 11

If it takes a supplier 4 days to deliver an order once it has been placed and the standard deviation of daily demand is 10, which of the following is the standard deviation of usage during lead time?

Accepted Answer

A) 10 
B) 20 
C) 40 
D) 100 
E) 400 
A) 10 
B) 20 
C) 40 
D) 100 
E) 400

Question 12

Which of the following is not an assumption of the basic fixed-order-quantity inventory model?

Accepted Answer

A) Ordering or setup costs are constant. 
B) Inventory holding cost is based on average inventory. 
C) Returns to scale of holding inventory are diminishing. 
D) Lead time is constant. 
E) Demand for the product is uniform throughout the period. 
A) Ordering or setup costs are constant. 
B) Inventory holding cost is based on average inventory. 
C) Returns to scale of holding inventory are diminishing. 
D) Lead time is constant. 
E) Demand for the product is uniform throughout the period.

Question 13

Using the ABC classification system for inventory, which of the following is a true statement?

Accepted Answer

A) The C items are of moderate dollar volume. 
B) You should allocate about 50 percent of the dollar volume to B items. 
C) The A items are of low dollar volume. 
D) The A items are of high dollar volume. 
E) Inexpensive and low usage items are classified as C no matter how critical. 
A) The C items are of moderate dollar volume. 
B) You should allocate about 50 percent of the dollar volume to B items. 
C) The A items are of low dollar volume. 
D) The A items are of high dollar volume. 
E) Inexpensive and low usage items are classified as C no matter how critical.

Question 14

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 15

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

Accepted Answer

A) True 
 B)False

Question 16

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a fixed-order-quantity inventory model?

Accepted Answer

A) Economic order quantity model 
B) The ABC model 
C) Periodic replenishment model 
D) Cycle counting model 
E) P model 
A) Economic order quantity model 
B) The ABC model 
C) Periodic replenishment model 
D) Cycle counting model 
E) P model

Question 18

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

Accepted Answer

A) True 
 B)False

Question 19

Savings from reduced inventory results in increased profit.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 20: Inventory Management

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

In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order-quantity inventory model, which of the following must be computed first?

Which of the following is usually included as an inventory holding cost?

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

The "sawtooth effect" is named after the jagged shape of the graph of inventory levels over time.

Which of the following is a fixed-time-period inventory model?

Price-break models deal with the fact that the selling price of an item varies with the order size.

Fixed-order-quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Which of the following is one of the categories of manufacturing inventory?

If it takes a supplier 4 days to deliver an order once it has been placed and the standard deviation of daily demand is 10, which of the following is the standard deviation of usage during lead time?

Which of the following is not an assumption of the basic fixed-order-quantity inventory model?

Using the ABC classification system for inventory, which of the following is a true statement?

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.

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

Which of the following is a fixed-order-quantity inventory model?

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

Savings from reduced inventory results in increased profit.

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

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