Question 1

Which of the following is not one of the assumptions of the basic EOQ model?

Accepted Answer

A)  Annual demand requirements are known and constant. 
B)  Lead time does not vary. 
C)  Each order is received in a single delivery. 
D)  Quantity discounts are available. 
E)  Ordering and holding costs have been estimated reasonably accurately. 
A)  Annual demand requirements are known and constant. 
B)  Lead time does not vary. 
C)  Each order is received in a single delivery. 
D)  Quantity discounts are available. 
E)  Ordering and holding costs have been estimated reasonably accurately.

Question 2

An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.

Accepted Answer

A) True 
 B)False

Question 3

Dairy items, fresh fruit, and newspapers are items that:

Accepted Answer

A)  do not require safety stocks. 
B)  cannot be ordered in large quantities. 
C)  are subject to deterioration and spoilage. 
D)  require that prices be lowered every two days. 
E)  have minimal holding costs. 
A)  do not require safety stocks. 
B)  cannot be ordered in large quantities. 
C)  are subject to deterioration and spoilage. 
D)  require that prices be lowered every two days. 
E)  have minimal holding costs.

Question 4

A dry cleaning firm uses an average of 20 gallons of cleaning fluid a day. Usage tends to be normally distributed with a standard deviation of two gallons per day. Lead time is four days, and the desired service level is 92 percent. What amount of safety stock is appropriate if a fixed order size of 600 gallons is used?

Accepted Answer

@#LAT-DLM& = 20 gallons per da

Question 5

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 6

EOQ inventory models are basically concerned with the timing of orders.

Accepted Answer

A) True 
 B)False

Question 7

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the economic production quantity would be approximately:

Accepted Answer

A)  the same. 
B)  20 percent larger. 
C)  40 percent larger. 
D)  20 percent smaller. 
E)  40 percent smaller. 
A)  the same. 
B)  20 percent larger. 
C)  40 percent larger. 
D)  20 percent smaller. 
E)  40 percent smaller.

Question 8

A manager intends to order a new machine and must now decide on the number of spare parts to order along with the machine. The parts cost $400 each and have no salvage value. The manager has compiled a frequency distribution for the probable usage of spare parts, as shown: $$\begin{array} { l l } 
\text { Usage } & \text { Frequency } \
\hline 0 & .08 \
1 & .30 \
2 & .24 \
3 & .20 \
4 & .18
\end{array}$$ For what range of shortage costs would stocking one spare part constitute an optimal decision?

Accepted Answer

C_e = $400 In order for a stocking level o

Question 9

In the A-B-C classification system, items which account for 15 percent of the total dollar volume for a majority of the inventory items would be classified as:

Accepted Answer

A)  A items. 
B)  B items. 
C)  C items. 
D)  A items plus B items. 
E)  B items plus C items. 
A)  A items. 
B)  B items. 
C)  C items. 
D)  A items plus B items. 
E)  B items plus C items.

Question 10

In the A-B-C classification system, items which account for 60 percent of the total dollar volume for few inventory items would be classified as:

Accepted Answer

A)  A items. 
B)  B items. 
C)  C items. 
D)  A items plus B items. 
E)  B items plus C items. 
A)  A items. 
B)  B items. 
C)  C items. 
D)  A items plus B items. 
E)  B items plus C items.

Question 11

A machine is expected to use approximately three spare parts during its useful life. The spares cost $200 each and have no salvage value or other use. The manager has ordered five spares. Assuming a Poisson usage rate, what range of shortage cost is implied?

Accepted Answer

C_e = $200 Mean = 3 (Poisson) C_s = ? Assumi

Question 12

Which one of the following is not generally a determinant of the reorder point?

Accepted Answer

A)  rate of demand 
B)  length of lead time 
C)  lead time variability 
D)  stockout risk 
E)  purchase cost 
A)  rate of demand 
B)  length of lead time 
C)  lead time variability 
D)  stockout risk 
E)  purchase cost

Question 13

Demand for a component averages 80 units per week, with a weekly standard deviation of demand of 14 units. The current supplier of this component offers a four-week lead time. Stockout risk is to be kept at 8 percent. Assume that it costs $50 to hold one unit in inventory for a year. Suppose the annual cost for the items would be $500 higher if they were purchased from another vendor, but that vendor would offer a two-week lead time. Would it be better to go with the more-expensive but more-responsive vendor?

Accepted Answer

Yes, using the secon

Question 14

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the average inventory level?

Accepted Answer

A)  20 pounds 
B)  40 pounds 
C)  60 pounds 
D)  80 pounds 
E)  100 pounds 
A)  20 pounds 
B)  40 pounds 
C)  60 pounds 
D)  80 pounds 
E)  100 pounds

Question 15

Annual ordering cost is inversely related to order size.

Accepted Answer

A) True 
 B)False

Question 16

Safety stock is held because we anticipate future demand.

Accepted Answer

A) True 
 B)False

Question 17

When to order can be calculated by the ROP and expressed as a quantity.

Accepted Answer

A) True 
 B)False

Question 18

In the quantity discount model, with carrying cost stated as a percentage of unit purchase price, in order for the EOQ of the lowest curve to be optimum, it must:

Accepted Answer

A)  have the lowest total cost. 
B)  be in a feasible range. 
C)  be to the left of the price break quantity for that price. 
D)  have the largest quantity compared to other EOQs. 
E)  have smaller ordering costs than the others. 
A)  have the lowest total cost. 
B)  be in a feasible range. 
C)  be to the left of the price break quantity for that price. 
D)  have the largest quantity compared to other EOQs. 
E)  have smaller ordering costs than the others.

Question 19

A cycle count program will usually require that A items be counted:

Accepted Answer

A)  daily. 
B)  once a week. 
C)  monthly. 
D)  quarterly. 
E)  more often than annually. 
A)  daily. 
B)  once a week. 
C)  monthly. 
D)  quarterly. 
E)  more often than annually.

Question 20

Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed.

Accepted Answer

A)  greater than the EOQ 
B)  equal to the EOQ 
C)  smaller than the EOQ 
D)  greater than or equal to the EOQ 
E)  smaller than or equal to the EOQ 
A)  greater than the EOQ 
B)  equal to the EOQ 
C)  smaller than the EOQ 
D)  greater than or equal to the EOQ 
E)  smaller than or equal to the EOQ

Exam 13: Inventory Management

Which of the following is not one of the assumptions of the basic EOQ model?

An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.

Dairy items, fresh fruit, and newspapers are items that:

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

EOQ inventory models are basically concerned with the timing of orders.

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the economic production quantity would be approximately:

In the A-B-C classification system, items which account for 15 percent of the total dollar volume for a majority of the inventory items would be classified as:

In the A-B-C classification system, items which account for 60 percent of the total dollar volume for few inventory items would be classified as:

A machine is expected to use approximately three spare parts during its useful life. The spares cost $200 each and have no salvage value or other use. The manager has ordered five spares. Assuming a Poisson usage rate, what range of shortage cost is implied?

Which one of the following is not generally a determinant of the reorder point?

Annual ordering cost is inversely related to order size.

Safety stock is held because we anticipate future demand.

When to order can be calculated by the ROP and expressed as a quantity.

In the quantity discount model, with carrying cost stated as a percentage of unit purchase price, in order for the EOQ of the lowest curve to be optimum, it must:

A cycle count program will usually require that A items be counted:

Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed.

Introduction to Operations Management

Competitiveness, Strategy, and Productivity

Forecasting

Product and Service Design

Extension: Reliability

Strategic Capacity Planning for Products and Services

Extension: Decision Theory

Process Selection and Facility Layout

Work Design and Measurement

Extension: Learning Curves

Location Planning and Analysis

Extension: The Transportation Model

Management of Quality

Quality Control

Extension: Acceptance Sampling

Aggregate Planning and Master Scheduling

MRP and ERP

Jit and Lean Operations

Extension: Maintenance

Supply Chain Management

Scheduling

Project Management

Management of Waiting Lines

Linear Programming

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