Question 1

The periodic inventory system is often preferred for high quantity,low value items.

Accepted Answer

A) True 
 B)False

Question 2

What is the annual purchase cost using the economic order quantity?

Accepted Answer

A) $60,000 
B) $61,000 
C) $65,000 
D) None of these answer choices is correct. 
A) $60,000 
B) $61,000 
C) $65,000 
D) None of these answer choices is correct.

Question 3

Periodic inventory systems initiate a new order when the level of inventory falls to the reorder point.

Accepted Answer

A) True 
 B)False

Question 4

What is the economic order quantity?

Accepted Answer

A) 100 
B) 115.47 
C) 200 
D) 500 
A) 100 
B) 115.47 
C) 200 
D) 500

Question 5

Maintaining a desired service level influences the level of safety stock.

Accepted Answer

A) True 
 B)False

Question 6

Explain the relationship between ordering costs and carrying costs in the economic order quantity (EOQ)model.

Accepted Answer

Ordering costs react inversely to carryi

Question 7

The three basic costs associated with inventory are holding costs,ordering costs and shortage costs.

Accepted Answer

A) True 
 B)False

Question 8

Seasonal inventory allows a firm to maintain a smooth production flow throughout the year.

Accepted Answer

A) True 
 B)False

Question 9

Continuous inventory systems are also referred to as a fixed-order-quantity system.

Accepted Answer

A) True 
 B)False

Question 10

The ABC classification system is a method for classifying inventory based on the percentage of total value and the percentage of total quantity.

Accepted Answer

A) True 
 B)False

Question 11

The order quantity cannot be calculated for a periodic inventory system that experiences variable demand.

Accepted Answer

A) True 
 B)False

Question 12

The demand for an electronic component is normally distributed with an average daily demand of 500 units,and a standard deviation of 50.The lead time for the component is 9 days.If the company sets a reorder point of 4,650 for this component then its service level is approximately

Accepted Answer

A) 50 percent. 
B) 84 percent. 
C) 92 percent. 
D) 98 percent. 
A) 50 percent. 
B) 84 percent. 
C) 92 percent. 
D) 98 percent.

Question 13

The order cycle is the time between receipts of orders in an inventory cycle.

Accepted Answer

A) True 
 B)False

Question 14

The economic order quantity (EOQ)model determines the optimal order size that minimizes total annual inventory costs.

Accepted Answer

A) True 
 B)False

Question 15

Shortage costs are easier to determine than carrying costs or ordering costs.

Accepted Answer

A) True 
 B)False

Question 16

Explain when it is better to use the continuous inventory system and when it is better to use the periodic inventory system.Discuss how the ABC classification system provides guidance in selecting one versus the other.

Accepted Answer

The continuous inventory system provides

Question 17

Carrying costs are more difficult to determine than ordering or shortage costs.

Accepted Answer

A) True 
 B)False

Question 18

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity then the total annual inventory cost for napkins is

Accepted Answer

A) $62,500. 
B) $5,000. 
C) $2,500. 
D) $1,250. 
A) $62,500. 
B) $5,000. 
C) $2,500. 
D) $1,250.

Question 19

Class A items in the ABC classification system require less monitoring and control than Class C items.

Accepted Answer

A) True 
 B)False

Question 20

The quantity discount model evaluates whether using an order size that qualifies for a price discount is always less cost effective than using the economic order quantity.

Accepted Answer

A) True 
 B)False

Exam 18: Inventory Management

The periodic inventory system is often preferred for high quantity,low value items.

What is the annual purchase cost using the economic order quantity?

Periodic inventory systems initiate a new order when the level of inventory falls to the reorder point.

What is the economic order quantity?

Maintaining a desired service level influences the level of safety stock.

Explain the relationship between ordering costs and carrying costs in the economic order quantity (EOQ)model.

The three basic costs associated with inventory are holding costs,ordering costs and shortage costs.

Seasonal inventory allows a firm to maintain a smooth production flow throughout the year.

Continuous inventory systems are also referred to as a fixed-order-quantity system.

The ABC classification system is a method for classifying inventory based on the percentage of total value and the percentage of total quantity.

The order quantity cannot be calculated for a periodic inventory system that experiences variable demand.

The demand for an electronic component is normally distributed with an average daily demand of 500 units,and a standard deviation of 50.The lead time for the component is 9 days.If the company sets a reorder point of 4,650 for this component then its service level is approximately

The order cycle is the time between receipts of orders in an inventory cycle.

The economic order quantity (EOQ)model determines the optimal order size that minimizes total annual inventory costs.

Shortage costs are easier to determine than carrying costs or ordering costs.

Explain when it is better to use the continuous inventory system and when it is better to use the periodic inventory system.Discuss how the ABC classification system provides guidance in selecting one versus the other.

Carrying costs are more difficult to determine than ordering or shortage costs.

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity then the total annual inventory cost for napkins is

Class A items in the ABC classification system require less monitoring and control than Class C items.

The quantity discount model evaluates whether using an order size that qualifies for a price discount is always less cost effective than using the economic order quantity.

Introduction to Operations and Supply Chain Management

Supplement Operational Decision-Making Tools: Decision Analysis

Quality Management

Statistical Process Control

Supplement Operational Decision-Making Tools: Acceptance Sampling

Product Design

Service Design

Processes and Technology

Capacity and Facilities

Supplement Operational Decision-Making Tools: Facility Location Models

Human Resources

Supplement Operational Decision-Making Tools: Work Measurement

Project Management

Supply Chain Management Strategy and Design

Global Supply Chain Procurement and Distribution

Supplement Operational Decision-Making Tools: Transportation and Transshipment Models

Forecasting

Supplement Operational Decision-Making Tools: Simulation

Sales and Operations Planning

Supplement Operational Decision-Making Tools: Linear Programming

Enterprise Resource Planning

Lean Systems

Scheduling

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