Chapter 10

7. Constant demand is a key assumption of the EOQ model. A. True b. False

A. True

For inventory systems with constant demand and a fixed lead time, A. the reorder point = lead-time demand. B. the reorder point > lead-time demand. C. the reorder point < lead-time demand. D. the reorder point is unrelated to lead-time demand.

A. the reorder point = lead-time demand.

be considered as inventory, goods must be finished and waiting for delivery. a. True B. False

B. False

At the optimal order quantity for the quantity discount model or the optimal order quantity, the annual holding and ordering costs are equa a. True b. False

B. True

When the reorder point r exceeds @*, the difference is a.safety stock B. one or more outstanding orders C.surplus inventory d. backorders

B. one or more outstanding orders

Which cost would not be considered part of a holding cost? A. cost of capital B. shipping cost C.insurance cost D. warehouse overhead

B. shipping cost

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

C. As the order quantity increases, annual ordering cost increases.

The EOQ model A. determines only how frequently to order. B. minimizes both ordering and holding costs. C. considers total cost. D. All of the alternatives are correct.

C. considers total cost

Inventory position is defined as a.the amount of inventory on hand in excess of expected demand. B. the amount of inventory on hand. C. the amount of inventory on hand plus the amount of inventory on order. d. None of the alternatives is correct.

C. the amount of inventory on hand plus the amount of inventory on order.

The objective of the EOQ with quantity discounts model is to 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 ordering, holding, and purchase costs.

D. minimize the sum of annual ordering, holding, and purchase costs.