Chapter 7 - graded

a. 123

Use the information below to calculate the number of orders per year when using the EOQ: Annual demand for an item is 43,000 units The cost to place an order is $200 The per unit cost of the item is $50.00 The annual holding rate is 35% a. 123 b. 49 c. 202 d. 81

e. 40

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is: a. 32. b. 13. c. 56. d. 2. e. 40

c. Production and use occur simultaneously.

Which of the following is NOT an assumption of the economic order quantity (EOQ) model? a. The only variable costs are setup cost and holding cost. b. Quantity discounts are not possible. c. Production and use occur simultaneously. d. Demand is known, constant, and independent. e. Lead time is known and constant.

b. False

The ABC inventory control prioritizes dependent demand inventory items into three groups, A, B, and C. A items receive the smallest amount of safety stock, while C items typically have the most safety stock. a. True b. False

c. item 1 (C), item 2 (A), item 3 (C), item 4 (B), item 5 (C)

Classify the following inventory items as either A, B, or C items using the ABC inventory control system: Item # Annual Sales Unit Cost 1 130 units $4.00 2 400 units $15.30 3 25 units $17.00 4 1,320 units $1.25 5 90 units $2.10 a. item 1 (A), item 2 (B), item 3 (C), item 4 (A), item 5 (B) b. item 1 (C), item 2 (B), item 3 (C), item 4 (A), item 5 (C) c. item 1 (C), item 2 (A), item 3 (C), item 4 (B), item 5 (C) d. item 1 (B), item 2 (A), item 3 (A), item 4 (C), item 5 (C) e. item 1 (B), item 2 (C), item 3 (B), item 4 (C), item 5 (A)

c. 1.250

If at the end of the year, the cost of revenue = $2,500, total revenue = $12,000 and inventory value = $2,000, the inventory turnover ratio would be: a. 0.375 b. 2.667 c. 1.250 d. 0.208 e. 0.800

c. 300

The cost of a product is $5, and the carrying cost rate is 20%; the cost of processing an order is $45 and the annual demand is 1000. What is the economic order quantity (EOQ)? a. 25 b. 5 c. 300 d. 20 e. 200

e. None of these choices are correct.

The primary purpose of the basic economic order quantity (EOQ) model is to: a. Maximize the customer service level b. Calculate the reorder point, so that replenishments take place at the proper time c. Calculate the optimum safety stock level d. Minimize the sum of purchase cost and holding cost e. None of these choices are correct.

b. The EOQ is at lot size G, and curve K is the annual holding cost curve.

Which of the following is TRUE regarding the EOQ figure below? a. Curve J represents the annual ordering cost, and curve L represents the annual holding cost. b. The EOQ is at lot size G, and curve K is the annual holding cost curve. c. A lot size of G has an annual total cost of about C. d. At lot size H both holding costs and ordering costs exceed the annual total cost.

a. it creates an unnecessary waste of scarce resources.

Which of the following is a disadvantage of carrying too much inventory? a. it creates an unnecessary waste of scarce resources. b. it reduces the need to conduct cycle counts. c. it leads to higher annual inventory ordering costs. d. it increases the need to purchase items. e. it leads to lower average finished goods inventories.

c. Bicycle tires used to assemble a bicycle

Which of the following would be considered a dependent demand item? a. Retail customers b. Televisions c. Bicycle tires used to assemble a bicycle d. Furniture

a. equal to the annual ordering cost.

If an item is ordered using its economic order quantity, the annual carrying cost should be: a. equal to the annual ordering cost. b. the square root of the annual ordering cost. c. slightly less than the annual ordering cost. d. twice the annual purchase price. e. None of these choices are correct.

a. Your order lot size was higher than the EOQ

If your company had an annual purchase cost of items equal to $2,000,000, an annual holding cost of $150,000 and an annual ordering cost of $50,000 this scenario would reveal that: a. Your order lot size was higher than the EOQ b. Your order lot size was equal to the EOQ c. Your order size was lower than the EOQ d. Nothing because there is insufficient information to discern where the EOQ would be.

c. 200 units

The College Bookstore sells a unique calculator to college students. The demand for this calculator has a normal distribution with an average daily demand of 20 units and a standard deviation of 4 units per day. The lead time for this calculator is 9 days. Compute the statistical reorder point that results in a 95 percent in-stock probability. Choose the closest answer. a. 20 units b. 180 units c. 200 units d. 420 units e. 80 units

c. 246 units

The College Bookstore sells a unique calculator to college students. The demand for this calculator is constant at 20 units per day. The lead time for this calculator is variable at an average of 9 days with a standard deviation of 2 days. Compute the statistical reorder point that results in a 95 percent in-stock probability. Choose the closest answer. a. 226 units b. 26 units c. 246 units d. 182 units e. 46 units

b. False

The four categories of inventory are raw materials, intermediate assemblies, work-in-progress and finished goods. a. True b. False

a. True

The inventory turnover ratio shows how efficiently a firm is using its inventory to generate revenue. a. True b. False

a. a higher level of safety stock is needed to buffer against uncertainty in demand over a longer planning horizon, compared to the EOQ system

Which of the following is true under the Periodic Review System? a. a higher level of safety stock is needed to buffer against uncertainty in demand over a longer planning horizon, compared to the EOQ system b. a lower level of safety stock is needed to buffer against uncertainty in demand over a longer planning horizon, compared to the EOQ system c. there are no discrepancies between physical inventory and the stock record d. it is more expensive to administer compared to the Continuous Review System e. the only uncertainty is the magnitude of demand during the delivery lead time

d. 80 percent of the total annual $ usage is accounted for, by 20 percent of the items.

Which of the following would refer to the 80/20 rule when applied to the ABC inventory control system? a. 80 percent of the unit cost accounts for 20 percent of the items. b. 80 percent of the items account for 20 percent of the groups. c. 20 percent of the items account for 80 percent of the tasks. d. 80 percent of the total annual $ usage is accounted for, by 20 percent of the items. e. None of these choices are correct.

a. To increase production change/setup costs

Which one of the following is NOT a reason for firms to carry inventory? a. To increase production change/setup costs b. To allow for production scheduling flexibility c. To maintain independence of operations d. To take advantage of quantity discounts e. To meet variations in product demand