Question 1

Inventory position is defined as the amount of inventory on hand plus the amount

Accepted Answer

A)   on order
B)   promised to customers
C)   on reserve
D)   to be returned to suppliersE) A) and D)
F) A) and C)

Question 2

The objective of the EOQ with quantity discounts model is to

Accepted Answer

A)   determine the minimum order quantity required for the maximum discount.
B)   balance annual ordering and holding costs.
C)   minimize annual purchase cost.
D)   minimize the sum of annual carrying, holding, and purchase costs.E) A) and B)
F) A) and C)

Question 3

Periodic review systems require smaller safety stock levels than corresponding continuous review systems.

Accepted Answer

A) True 
 B)False

Question 4

Bank Drugs sells Jami Michelle lipstick. The Jami Michelle Company offers a 6% discount on orders of at least 500 tubes, a 10% discount on orders of at least 1,000 tubes, a 12% discount on orders of at least 1,800 tubes and a 15% discount on orders at least 2,500 tubes.
Bank sells an average of 40 tubes of Jami Michelle lipstick weekly. The normal price paid by Bank drugs is $1 per tube. If it costs Bank $30 to place an order, and Bank's annual holding cost rate is 27%, determine the optimal order policy for Bank Drugs.

Accepted Answer

Order 1000...

Question 5

The EOQ model is insensitive to small variations or errors in the cost estimates.

Accepted Answer

A) True 
 B)False

Question 6

Safety stock

Accepted Answer

A)   can be determined by the EOQ formula.
B)   depends on the inventory position.
C)   depends on the variability of demand during lead time.
D)   is not needed if Q* is the actual order quantity.E) C) and D)
F) B) and D)

Question 7

An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

Accepted Answer

A) True 
 B)False

Question 8

Annual purchase cost is included in the total cost in

Accepted Answer

A)   the EOQ model.
B)   the economic production lot size model.
C)   the quantity discount model.
D)   all inventory models.E) None of the above
F) All of the above C

Question 9

As lead time for an item increases, the cycle time increases.

Accepted Answer

A) True 
 B)False

Question 10

For the EOQ model, which of the following relationships is incorrect?

Accepted Answer

A)   As the order quantity increases, the number of orders placed annually decreases.
B)   As the order quantity increases, annual holding cost increases.
C)   As the order quantity increases, annual ordering cost increases.
D)   As the order quantity increases, average inventory increases.E) A) and B)
F) None of the above

Question 11

If the optimal production lot size decreases, average inventory increases.

Accepted Answer

A) True 
 B)False

Question 12

Constant demand is a key assumption of the EOQ model.

Accepted Answer

A) True 
 B)False

Question 13

For inventory systems with constant demand and a fixed lead time,

Accepted Answer

A)   the reorder point = lead-time demand.
B)   the reorder point > lead-time demand.
C)   the reorder point 
D)   the reorder point is unrelated to lead-time demand.E) B) and D)
F) A) and B)

Question 14

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Accepted Answer

A) True 
 B)False

Question 15

For the inventory model with planned shortages, the optimal order quantity results in

Accepted Answer

A)   annual holding cost = annual ordering cost.
B)   annual holding cost = annual backordering cost.
C)   annual ordering cost = annual holding cost + annual backordering cost.
D)   annual ordering cost = annual holding cost - annual backordering cost.E) A) and C)
F) C) and D) C

Question 16

Inventory models in which the rate of demand is constant are called

Accepted Answer

A)   fixed models.
B)   deterministic models.
C)   JIT models.
D)   requirements models.E) A) and B)
F) All of the above B

Question 17

A weekly sports magazine publishes a special edition for the World Series. The sales forecast is for the number of copies to be normally distributed with mean 800,000 copies and standard deviation 60,000 copies. It costs $.35 to print a copy, and the newsstand price is $1.95. Unsold copies will be scrapped. How many copies should be printed?

Accepted Answer

P(demand < Q*) = 1.6...

Question 18

Inventory

Accepted Answer

A)   is held against uncertain usage so that a supply of items is available if needed.
B)   constitutes a small part of the cost of doing business.
C)   is not something that can be managed effectively.
D)   All of the alternatives are correct.E) A) and C)
F) B) and C)

Question 19

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

Accepted Answer

A)   the Q* to increase
B)   the maximum inventory level to increase.
C)   the order cycle to decrease.
D)   annual holding cost to be less than annual setup cost.E) B) and C)
F) A) and B)

Question 20

The time between placing orders is the lead time.

Accepted Answer

A) True 
 B)False

Exam 10: Inventory Models

Inventory position is defined as the amount of inventory on hand plus the amount

Correct Answer
verified

The objective of the EOQ with quantity discounts model is to

Correct Answer
verified

Periodic review systems require smaller safety stock levels than corresponding continuous review systems.

Correct Answer
verified

Correct Answer
verified
Order 1000...
View Answer

The EOQ model is insensitive to small variations or errors in the cost estimates.

Correct Answer
verified

Safety stock

Correct Answer
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An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

Correct Answer
verified

Annual purchase cost is included in the total cost in

Correct Answer
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C

As lead time for an item increases, the cycle time increases.

Correct Answer
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For the EOQ model, which of the following relationships is incorrect?

Correct Answer
verified

If the optimal production lot size decreases, average inventory increases.

Correct Answer
verified

Constant demand is a key assumption of the EOQ model.

Correct Answer
verified

For inventory systems with constant demand and a fixed lead time,

Correct Answer
verified

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Correct Answer
verified

For the inventory model with planned shortages, the optimal order quantity results in

Correct Answer
verified
C

Inventory models in which the rate of demand is constant are called

Correct Answer
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B

Correct Answer
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P(demand < Q*) = 1.6...
View Answer

Inventory

Correct Answer
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A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

Correct Answer
verified

The time between placing orders is the lead time.

Correct Answer
verified

Exam 10: Inventory Models

Inventory position is defined as the amount of inventory on hand plus the amount

Correct AnswerverifiedShow Answer

The objective of the EOQ with quantity discounts model is to

Correct AnswerverifiedShow Answer

Periodic review systems require smaller safety stock levels than corresponding continuous review systems.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedOrder 1000...View AnswerShow Answer

The EOQ model is insensitive to small variations or errors in the cost estimates.

Correct AnswerverifiedShow Answer

Safety stock

Correct AnswerverifiedShow Answer

An assumption in the economic production lot size model is that there is storage capacity to hold the entire production lot.

Correct AnswerverifiedShow Answer

Annual purchase cost is included in the total cost in

Correct AnswerverifiedC

As lead time for an item increases, the cycle time increases.

Correct AnswerverifiedShow Answer

For the EOQ model, which of the following relationships is incorrect?

Correct AnswerverifiedShow Answer

If the optimal production lot size decreases, average inventory increases.

Correct AnswerverifiedShow Answer

Constant demand is a key assumption of the EOQ model.

Correct AnswerverifiedShow Answer

For inventory systems with constant demand and a fixed lead time,

Correct AnswerverifiedShow Answer

In the periodic review model, the order quantity at each review period must be sufficient to cover demand for the review period plus the demand for the following lead time.

Correct AnswerverifiedShow Answer

For the inventory model with planned shortages, the optimal order quantity results in

Correct AnswerverifiedC

Inventory models in which the rate of demand is constant are called

Correct AnswerverifiedB

Correct AnswerverifiedP(demand < Q*) = 1.6...View AnswerShow Answer

Inventory

Correct AnswerverifiedShow Answer

A firm that is presently using the Economic Order Quantity model and is planning to switch to the Economic Production Lot-Size model can expect

Correct AnswerverifiedShow Answer

The time between placing orders is the lead time.

Correct AnswerverifiedShow Answer

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Order 1000...
View Answer

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C

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C

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B

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P(demand < Q*) = 1.6...
View Answer

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Correct Answer
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Correct Answer
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