Question 1

Administrative costs provide a strong incentive to place larger orders.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a consequence of being out of stock of an item?

Accepted Answer

A)  Customer dissatisfaction.
B)  Delayed revenues.
C)  Costs for additional record keeping.
D)  Lost business.
E)  All of the above.F) A) and E)
G) None of the above

Question 3

In the basic EOQ model,if usage and production/delivery rates are equal,there will be no inventory buildup,and thus the order quantity cannot be calculated.

Accepted Answer

A) True 
 B)False

Question 4

At what point should the manager reorder?

Accepted Answer

A)  0 cases remaining.
B)  4 cases remaining.
C)  12 cases remaining.
D)  16 cases remaining.
E)  20 cases remaining.F) None of the above
G) C) and D)

Question 5

The objective of an inventory policy is to minimize the total inventory cost per unit time.

Accepted Answer

A) True 
 B)False

Question 6

The objective of inventory management is to minimize the cost of holding inventory.

Accepted Answer

A) True 
 B)False

Question 7

In the EOQ model with planned shortages,Q* always will be smaller than S*.

Accepted Answer

A) True 
 B)False

Question 8

Using the EOQ model,if an item's holding cost increases,it will be ordered more frequently.

Accepted Answer

A) True 
 B)False

Question 9

The average inventory level is inversely related to order size.

Accepted Answer

A) True 
 B)False

Question 10

Safety stock is held to meet anticipated need.

Accepted Answer

A) True 
 B)False

Question 11

Annual setup cost is a function of order size.

Accepted Answer

A) True 
 B)False

Question 12

The goal of the basic EOQ model is to:

Accepted Answer

A)  minimize order size.
B)  minimize order cost.
C)  minimize holding cost.
D)  minimize the sum of purchasing and setup costs.
E)  minimize the sum of setup and holding costs.F) C) and E)
G) A) and E)

Question 13

In the EOQ model with quantity discounts,with holding 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 pricebreak quantity for that price.
D)  have the largest quantity compared to other EOQs.
E)  None of the above.F) C) and D)
G) A) and C)

Question 14

The JIT philosophy recognizes that inventories are a necessary investment.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following is not a benefit of JIT systems?

Accepted Answer

A)  Inventories are reduced.
B)  Space requirements are reduced.
C)  Quality is increased.
D)  Lead times are increased.
E)  Disruptions in production are reduced.F) None of the above
G) D) and E)

Question 16

In the basic EOQ model,if annual demand is 50,holding cost is $2,and setup cost is $15,EOQ is approximately:

Accepted Answer

A)  11.
B)  20.
C)  24.
D)  28.
E)  375.F) A) and B)
G) B) and C)

Question 17

Planned shortages are permitted in the EOQ model with gradual replenishment.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is not an assumption of the basic EOQ model?

Accepted Answer

A)  The usage rate is constant.
B)  Only one product is involved.
C)  Holding costs are independent of price.
D)  Each order is received in a single delivery.
E)  There are no quantity discounts.F) A) and B)
G) A) and C)

Question 19

What is the EOQ for pepperoni?

Accepted Answer

A)  20 pounds.
B)  40 pounds.
C)  60 pounds.
D)  80 pounds.
E)  100 pounds.F) All of the above
G) B) and C)

Question 20

Which of the following is not considered a holding cost?

Accepted Answer

A)  Interest.
B)  Insurance.
C)  Depreciation.
D)  Opportunity cost.
E)  Stockout cost.F) B) and E)
G) A) and B)

Exam 21: CD - Inventory Management With Known Demand

The objective of an inventory policy is to minimize the total inventory cost per unit time.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The objective of inventory management is to minimize the cost of holding inventory.

Correct AnswerverifiedShow Answer

In the EOQ model with planned shortages,Q* always will be smaller than S*.

Correct AnswerverifiedShow Answer

Annual setup cost is a function of order size.

Correct AnswerverifiedShow Answer

The goal of the basic EOQ model is to:

Correct AnswerverifiedShow Answer

Which of the following is not an assumption of the basic EOQ model?

Correct AnswerverifiedShow Answer

In the basic EOQ model,if annual demand is 50,holding cost is $2,and setup cost is $15,EOQ is approximately:

Correct AnswerverifiedShow Answer

Which of the following is a consequence of being out of stock of an item?

Correct AnswerverifiedShow Answer

Which of the following is not a benefit of JIT systems?

Correct AnswerverifiedShow Answer

Which of the following is not considered a holding cost?

Correct AnswerverifiedShow Answer

The JIT philosophy recognizes that inventories are a necessary investment.

Correct AnswerverifiedShow Answer

What is the EOQ for pepperoni?

Correct AnswerverifiedShow Answer

Administrative costs provide a strong incentive to place larger orders.

Correct AnswerverifiedShow Answer

At what point should the manager reorder?

Correct AnswerverifiedShow Answer

Using the EOQ model,if an item's holding cost increases,it will be ordered more frequently.

Correct AnswerverifiedShow Answer

The average inventory level is inversely related to order size.

Correct AnswerverifiedShow Answer

Safety stock is held to meet anticipated need.

Correct AnswerverifiedShow Answer

Planned shortages are permitted in the EOQ model with gradual replenishment.

Correct AnswerverifiedShow Answer

In the basic EOQ model,if usage and production/delivery rates are equal,there will be no inventory buildup,and thus the order quantity cannot be calculated.

Correct AnswerverifiedShow Answer

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