Final Exam Chapter 12

Product ___________ refers to the situation when customers are willing to purchase a less preferred version when their most preferred version is not available. A. substitution B. promotion C. economy D. sustainability

A

The parameters of the economic order quantity (EOQ) model include all of the following except: A. order quantity. B. demand rate. C. holding cost per unit per year. D. ordering cost per order.

A

Which of the following is a pallet? A. It is the quantity of inventory that is stacked on the platform. B. It is the amount of time that inventory stayed on the platform. C. It is the quantity of inventory ordered to minimize moving time. D. It is the quantity of inventory ordered to minimize inventory costs.

A

T/F A firm's ordering cost per year is independent of its order quantity decision.

F

T/F As demand increases, the optimal economic order quantity increases at the same rate of demand.

F

T/F Limited inventory always increases demand because of the scarcity effect.

F

T/F When solving for an optimal order quantity in the presence of a quantity discount, a rule of thumb is to select an order quantity which takes advantage of the discount.

F

T/F When solving for an optimal order quantity in the presence of order quantity restrictions, a rule of thumb is to order at a feasible quantity closest to the economic order quantity.

F

T/F Expanding product variety does not always result in an increase in profit.

T

Economies of scale describes the relationship between ___________ and ___________. A. product variety, demand B. operational efficiency, demand C. product variety, supply D. operational efficiency, supply

B

The assumptions behind the economic order quantity (EOQ) model include all of the following EXCEPT: A. a constant rate of demand. B. a fixed ordering cost per year. C. a fixed lead time. D. a fixed purchase price per unit.

B

When is expanding product variety not a good idea? A. When adding variety increases overall margin. B. When adding variety increases total demand insignificantly C. When adding variety increases consumer value significantly D. When adding variety increases overall profitability

B

As demand increases, the sum of ordering and holding costs per period for the economic order quantity _______ at a rate _________ than demand. A. increases, faster B. decreases, faster C. increases, slower D. decreases, slower

C

Which of the following is NOT a possible complication that prevents a firm from ordering at the economic order quantity level? A. A supplier offers a quantity discount. B. A supplier places order quantity restrictions. C. A supplier charges a fixed cost to place an order. D. An area offers limited space to hold the inventory received from a supplier.

C

Which of the following is TRUE regarding the economic order quantity (EOQ) model? A. Demand rate is dependent on order quantity. B. Ordering cost per order is dependent on order quantity. C. Holding cost per unit per year is independent of order quantity. D. Holding cost per unit per year is dependent on the selling price per unit.

C

Which of the following is TRUE regarding the source of economies of scale in inventory management according to the economic order quantity model? A. The source of economies of scale is a fixed demand rate. B. The source of economies of scale is a fixed order quantity. C. The source of economies of scale is a fixed ordering cost. D. The source of economies of scale is a fixed holding cost.

C

Which of the following statements concerning the economic order quantity (EOQ) model is FALSE? A. The holding cost per unit of time is equal to the ordering cost per unit of time when ordering at the EOQ level. B. The sum of the holding cost and ordering cost per unit of time is minimized when ordering at the EOQ level. C. If the order quantity is large, the ordering cost dominates the EOQ cost. D. If the order quantity is large, the holding cost dominates the EOQ cost.

C

The ________ of the product refers to how high the product can be put on top of another without causing damage to the lower layers. A. weight limit B. batch size C. pallet dimension D. stackability

D

The sum of ordering and holding costs per period for the economic order quantity becomes a ________ percentage of the purchasing cost as the demand rate __________. A. fixed, increases B. fixed, decreases C. larger, increases D. smaller, increases

D

Which of the following is TRUE when solving for the optimal order quantity in the presence of a quantity discount? A. The economic order quantity at the regular price is the optimal order quantity only if it is less than the threshold needed for the quantity discount. B. The economic order quantity at the discount price is always the optimal order quantity. C. The economic order quantity at the regular price is always the optimal order quantity. D. The economic order quantity at the discount price is the optimal order quantity if it is greater than or equal to the threshold needed for the quantity discount.

D

Which of the following is a consequence of economies of scale according to the economic order quantity model? A. If a product is not popular, its total economic order quantity costs are a small portion of the purchase cost. B. If the demand rate for a product is high, its total economic order quantity costs are a large portion of the purchase cost. C. More product variety always results in higher profit. D. More product variety does not always result in higher profit.

D

_________ in demand rate of a product makes its inventory management __________ because of an increase in inventory costs. A. A decrease, more efficient B. An increase, less efficient C. An increase, more efficient D. A decrease, less efficient

D