Question 1

Which of the following statements about the basic EOQ model is FALSE?

Accepted Answer

A) If the setup cost were to decrease,the EOQ would fall. 
B) If annual demand were to double,the number of orders per year would increase. 
C) If the ordering cost were to increase,the EOQ would rise. 
D) If annual demand were to double,the EOQ would also double. 
E) All of the above statements are true. 
A) If the setup cost were to decrease,the EOQ would fall. 
B) If annual demand were to double,the number of orders per year would increase. 
C) If the ordering cost were to increase,the EOQ would rise. 
D) If annual demand were to double,the EOQ would also double. 
E) All of the above statements are true.

Question 2

Which of the following should be higher in P systems than Q systems?

Accepted Answer

A) lead time 
B) demand 
C) order size 
D) order spacing 
E) safety stock 
A) lead time 
B) demand 
C) order size 
D) order spacing 
E) safety stock

Question 3

________ inventory is material that is usually purchased,but has yet to enter the manufacturing process.

Accepted Answer

The answer of ________ inventory is material that is usually...

Question 4

Which of the following statements about the basic EOQ model is TRUE?

Accepted Answer

A) If the ordering cost were to double,the EOQ would rise. 
B) If annual demand were to double,the EOQ would increase. 
C) If the carrying cost were to increase,the EOQ would fall. 
D) If annual demand were to double,the number of orders per year would increase. 
E) All of the above statements are true. 
A) If the ordering cost were to double,the EOQ would rise. 
B) If annual demand were to double,the EOQ would increase. 
C) If the carrying cost were to increase,the EOQ would fall. 
D) If annual demand were to double,the number of orders per year would increase. 
E) All of the above statements are true.

Question 5

Safety stock in inventory systems depends only on the average demand during the lead time.

Accepted Answer

A) True 
 B)False

Question 6

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

Accepted Answer

A) True 
 B)False

Question 7

What happens to the cost of safety stock when the service level increases?

Accepted Answer

Because Z increases,the amount

Question 8

A product has a reorder point of 110 units,and is ordered four times a year on average.The following table shows the historical distribution of demand values observed during lead time.
   Managers have noted that stockouts occur 30 percent of the time with this policy,and they question whether a change in inventory policy,to include some safety stock,might be an improvement.The managers realize that any safety stock would increase the service level,but they are worried about the increased costs of carrying the safety stock.Currently,stockouts are valued at $20 per unit per occurrence,while inventory carrying costs are $10 per unit per year.What is your advice? Do higher levels of safety stock add to total costs,or not? What level of safety stock is best?

Accepted Answer

@#IMG-DLM& The cheapest inventory policy

Question 9

What are the four functions of inventory?

Accepted Answer

(1)to provide a selection of goods for a

Question 10

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car.Daily paper sales are normally distributed,with a mean of 100 and standard deviation of 10.He sells papers for $0.50 and pays $0.30 for them.Unsold papers are trashed with no salvage value.How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?

Accepted Answer

Service level = Cs/(Cs + Co)= .2/(.2+.3)

Question 11

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

Accepted Answer

The firm should order 250 units at a tim

Question 12

A product whose EOQ is 400 units experiences a 50% increase in demand.The new EOQ is:

Accepted Answer

A) unchanged. 
B) increased by less than 50%. 
C) increased by 50%. 
D) increased by more than 50%. 
E) cannot be determined 
A) unchanged. 
B) increased by less than 50%. 
C) increased by 50%. 
D) increased by more than 50%. 
E) cannot be determined

Question 13

Average daily demand for a product is normally distributed with a mean of 5 units and a standard deviation of 1 unit.Lead time is fixed at four days.
(a)What is the reorder point if there is no safety stock?
(b)What is the reorder point if the service level is 80 percent?
(c)How much more safety stock is required if the service level is raised from 80 percent to 90 percent?

Accepted Answer

This problem requires formula 12-15,sinc

Question 14

The Rushton Trash Company stocks,among many other products,a certain container,each of which occupies four square feet of warehouse space.The warehouse space currently available for storing this product is limited to 600 square feet.Demand for the product is 15,000 units per year.Holding costs are $4 per container per year.Ordering costs are $5 per order.
(a)What is the cost-minimizing order quantity decision for Rushton?
(b)What is the total inventory-related cost of this decision?
(c)What is the total inventory-related cost of managing the inventory of this product,when the limited amount of warehouse space is taken into account?
(d)What would the firm be willing to pay for additional warehouse space?

Accepted Answer

(a)The EOQ is about 194,more than there

Question 15

Identify the four types of inventory.

Accepted Answer

(1)raw material inventory; (2)

Question 16

The demand for automobiles would be considered as independent demand.

Accepted Answer

A) True 
 B)False

Question 17

ABC analysis is based upon the principle that:

Accepted Answer

A) all items in inventory must be monitored very closely. 
B) there are usually a few critical items,and many items that are less critical. 
C) an item is critical if its usage is high. 
D) more time should be spent on class "C" items because there are many more of them. 
E) as with grade distributions in many MBA courses,there should be more medium-level "B" items than either "A" or "C" items. 
A) all items in inventory must be monitored very closely. 
B) there are usually a few critical items,and many items that are less critical. 
C) an item is critical if its usage is high. 
D) more time should be spent on class "C" items because there are many more of them. 
E) as with grade distributions in many MBA courses,there should be more medium-level "B" items than either "A" or "C" items.

Question 18

In an economic order quantity problem,the total annual cost curve is at its ________ where annual holding costs equal annual setup costs.

Accepted Answer

The answer of In an economic order quantity problem,the total...

Question 19

Work-in-process inventory is devoted to maintenance,repair,and operating materials.

Accepted Answer

A) True 
 B)False

Question 20

Consider a product with a daily demand of 400 units,a setup cost per production run of $100,a monthly holding cost per unit of $2.00,and an annual production rate of 292,000 units.The firm operates and experiences demand 365 days per year.Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model.How much money per year has that mistake cost the company?

Accepted Answer

d = 400 units D = 400(365)= 146,000 unit

Exam 13: Inventory Management

Which of the following statements about the basic EOQ model is FALSE?

Which of the following should be higher in P systems than Q systems?

________ inventory is material that is usually purchased,but has yet to enter the manufacturing process.

Which of the following statements about the basic EOQ model is TRUE?

Safety stock in inventory systems depends only on the average demand during the lead time.

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

What happens to the cost of safety stock when the service level increases?

What are the four functions of inventory?

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

A product whose EOQ is 400 units experiences a 50% increase in demand.The new EOQ is:

Identify the four types of inventory.

The demand for automobiles would be considered as independent demand.

ABC analysis is based upon the principle that:

In an economic order quantity problem,the total annual cost curve is at its ________ where annual holding costs equal annual setup costs.

Work-in-process inventory is devoted to maintenance,repair,and operating materials.

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