Question 1

In the quantity discount model,the cost of acquiring goods (product cost)is not a factor in determining lot size.

Accepted Answer

A) True 
 B)False

Question 2

Joe's Camera shop has a favorite model that has annual sales of 145.The cost to place an order to replenish inventory is $25 per order,and annual inventory holding cost per unit is $20.Assume the store is open 350 days per year.
a.What is the optimal order size?
b.What is the optimal number of orders per year?
c.What is the optimal number of days between orders?
d.What is the annual holding and setup cost?

Accepted Answer

a.The optimal order size is Q* = @#IMG-DLM& = 19.0

Question 3

The EOQ model is best suited for items whose demand is dependent on other products.

Accepted Answer

A) True 
 B)False

Question 4

Q is to ________ systems as P is to ________ systems.

Accepted Answer

A) fixed quantity,fixed period 
B) variable demand,constant demand 
C) variable lead time,variable demand 
D) variable quantity,variable period 
E) quality,price 
A) fixed quantity,fixed period 
B) variable demand,constant demand 
C) variable lead time,variable demand 
D) variable quantity,variable period 
E) quality,price

Question 5

The main trait of a single-period model is that:

Accepted Answer

A) inventory has limited value after a certain period of time. 
B) it has the largest EOQ sizes. 
C) the order quantity should usually equal the expected value of demand. 
D) supply is limited. 
E) the cost of a shortage cannot be determined accurately. 
A) inventory has limited value after a certain period of time. 
B) it has the largest EOQ sizes. 
C) the order quantity should usually equal the expected value of demand. 
D) supply is limited. 
E) the cost of a shortage cannot be determined accurately.

Question 6

Consider a local club selling Christmas trees.If demand is normal with a mean of 200 and a standard deviation of 50,how many trees should the club stock if service level must be greater than 95%?

Accepted Answer

The Z-value for a 95

Question 7

Given the following data: D=65,000 units per year,S = $120 per setup,P = $5 per unit,and I = 25% per year,(a)calculate the EOQ,and (b)calculate annual costs of holding and setup following EOQ behavior.

Accepted Answer

(a)Q* = @#IMG-DLM& = 3532.7 un

Question 8

If demand is not uniform and constant,then stockout risks can be controlled by:

Accepted Answer

A) increasing the EOQ. 
B) spreading annual demand over more frequent,but smaller,orders. 
C) raising the selling price to reduce demand. 
D) adding safety stock. 
E) reducing the reorder point. 
A) increasing the EOQ. 
B) spreading annual demand over more frequent,but smaller,orders. 
C) raising the selling price to reduce demand. 
D) adding safety stock. 
E) reducing the reorder point.

Question 9

An organization has had a policy of ordering 70 units at a time.Their annual demand is 340 units,and the item has an annual carrying cost of $2.The assumptions of the EOQ are thought to apply.For what value of ordering cost would this order size be optimal?

Accepted Answer

Start with the econo

Question 10

Which of the following is a requirement of Q systems?

Accepted Answer

A) perpetual inventory system 
B) constant order spacing 
C) variable lead time 
D) constant demand 
E) all of the above 
A) perpetual inventory system 
B) constant order spacing 
C) variable lead time 
D) constant demand 
E) all of the above

Question 11

Service level is the complement of the probability of a stockout.

Accepted Answer

A) True 
 B)False

Question 12

A printing company estimates that it will require 1,000 reams of a certain type of paper in a given period.The cost of carrying one unit in inventory for that period is 50 cents.The company buys the paper from a wholesaler in the same town,sending its own truck to pick up the orders at a fixed cost of $20.00 per trip.Treating this cost as the order cost,(a)what is the optimum number of reams to buy at one time? (b)How many times should lots of this size be bought during this period? (c)What is the minimum cost (holding and setup)of maintaining inventory on this item for the period? (d)Of this total cost,how much is carrying cost and how much is ordering cost?

Accepted Answer

This is an EOQ problem,even though the t

Question 13

A local club is selling Christmas trees and deciding how many to stock for the month of December.If demand is normally distributed with a mean of 100 and standard deviation of 20,trees have no salvage value at the end of the month,trees cost $20,and trees sell for $50 what is the service level?

Accepted Answer

A) .60 
B) .20 
C) .84 
D) .40 
E) unable to determine given the above information 
A) .60 
B) .20 
C) .84 
D) .40 
E) unable to determine given the above information

Question 14

In the production order quantity model,the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Accepted Answer

demand rat

Question 15

Milk is stocked at the grocery store each week.At the end of the week unsold milk is reduced in price by 70% and always sells for this lower price instantly.If weekly demand for milk is normally distributed with a mean of 200 gallons and standard deviation of 25 gallons,find the price for which a fresh gallon of milk sells.Assume a service level of 95% and that the store purchases milk for $2 per gallon.

Accepted Answer

Service level = Cs/(Cs + Co).If the sell

Question 16

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

Accepted Answer

A) True 
 B)False

Question 17

Cycle counting:

Accepted Answer

A) is a process by which inventory records are verified once a year. 
B) eliminates annual inventory adjustments. 
C) provides a measure of inventory turnover. 
D) assumes that all inventory records must be verified with the same frequency. 
E) assumes that the most frequently used items must be counted more frequently. 
A) is a process by which inventory records are verified once a year. 
B) eliminates annual inventory adjustments. 
C) provides a measure of inventory turnover. 
D) assumes that all inventory records must be verified with the same frequency. 
E) assumes that the most frequently used items must be counted more frequently.

Question 18

Which of the following is NOT one of the four main types of inventory?

Accepted Answer

A) raw material inventory 
B) work-in-process inventory 
C) maintenance/repair/operating supply inventory 
D) safety stock inventory 
E) finished-goods inventory 
A) raw material inventory 
B) work-in-process inventory 
C) maintenance/repair/operating supply inventory 
D) safety stock inventory 
E) finished-goods inventory

Question 19

Holstein Computing manufactures an inexpensive audio card (Audio Max)for assembly into several models of its microcomputers.The annual demand for this part is 100,000 units.The annual inventory carrying cost is $5 per unit and the cost of preparing an order and making production setup for the order is $750.The company operates 250 days per year.The machine used to manufacture this part has a production rate of 2000 units per day.
(a)Calculate the optimum lot size.
(b)How many lots are produced in a year?
(c)What is the average inventory for Audio Max?
(d)What is the annual holding and setup cost for Audio Max?

Accepted Answer

(a)Q*p = @#IMG-DLM& = @#IMG-DLM& = 6123.7 or 6124 units. (b)

Question 20

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones?

Accepted Answer

A) housing costs 
B) material handling costs 
C) labor cost 
D) investment costs 
E) pilferage,scrap,and obsolescence 
A) housing costs 
B) material handling costs 
C) labor cost 
D) investment costs 
E) pilferage,scrap,and obsolescence

Exam 13: Inventory Management

In the quantity discount model,the cost of acquiring goods (product cost)is not a factor in determining lot size.

The EOQ model is best suited for items whose demand is dependent on other products.

Q is to ________ systems as P is to ________ systems.

The main trait of a single-period model is that:

Consider a local club selling Christmas trees.If demand is normal with a mean of 200 and a standard deviation of 50,how many trees should the club stock if service level must be greater than 95%?

Given the following data: D=65,000 units per year,S = $120 per setup,P = $5 per unit,and I = 25% per year,(a)calculate the EOQ,and (b)calculate annual costs of holding and setup following EOQ behavior.

If demand is not uniform and constant,then stockout risks can be controlled by:

An organization has had a policy of ordering 70 units at a time.Their annual demand is 340 units,and the item has an annual carrying cost of $2.The assumptions of the EOQ are thought to apply.For what value of ordering cost would this order size be optimal?

Which of the following is a requirement of Q systems?

Service level is the complement of the probability of a stockout.

A local club is selling Christmas trees and deciding how many to stock for the month of December.If demand is normally distributed with a mean of 100 and standard deviation of 20,trees have no salvage value at the end of the month,trees cost $20,and trees sell for $50 what is the service level?

In the production order quantity model,the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

Cycle counting:

Which of the following is NOT one of the four main types of inventory?

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones?

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Q is to systems as P is to systems.