SCMA 320 Quiz 12

When quantity discounts are allowed, the cost-minimizing order quantity: A) is always an EOQ quantity. B) minimizes the unit purchase price. C) minimizes the sum of holding and ordering costs. D) minimizes the sum of holding, ordering, and product costs. E) may be a quantity below that at which one qualifies for that price.

D) minimizes the sum of holding, ordering, and product costs.

Among the advantages of cycle counting is that it: A) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. B) does not require the detailed records necessary when annual physical inventory is used. C) does not need to be performed for less expensive items. D) makes the annual physical inventory more acceptable to management. E) does not require highly trained people.

A) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory.

Most inventory models attempt to minimize: A) the likelihood of a stockout. B) the safety stock. C) the number of orders placed. D) total inventory-based costs. E) the number of items ordered.

D) total inventory-based costs.

Which of the following is an element of inventory holding costs? A) investment costs B) material handling costs C) housing costs D) pilferage, scrap, and obsolescence E) All of the above are elements of inventory holding costs.

E) All of the above are elements of inventory holding costs.

Which of the following is a function of inventory? A) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand B) to decouple various parts of the production process C) to take advantage of quantity discounts D) to hedge against inflation E) All of the above are functions of inventory.

E) All of the above are functions of inventory.

The purpose of safety stock is to: A) eliminate the likelihood of a stockout due to erroneous inventory tally. B) replace failed units with good ones. C) protect the firm from a sudden decrease in demand. D) eliminate the possibility of a stockout. E) control the likelihood of a stockout due to variable demand and/or lead time.

E) control the likelihood of a stockout due to variable demand and/or lead time.

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost ________ per year in total annual inventory (holding and setup) costs. A) $1200 B) $800 C) $400 D) Zero; this is a class C item. E) Cannot be determined because the unit price is not known.

B) $800

Which of the following items is mostly likely managed using a single-period order model? A) canned food at the grocery store B) Christmas trees C) automobiles at a dealership D) metal for a manufacturing process E) gas sold to a gas station

B) Christmas trees

The proper quantity of safety stock is typically determined by: A) multiplying the EOQ by the desired service level. B) setting the level of safety stock so that a given stockout risk is not exceeded. C) minimizing total costs. D) using a single-period model. E) carrying sufficient safety stock so as to eliminate all stockouts.

B) setting the level of safety stock so that a given stockout risk is not exceeded.

Which of the following is a requirement of Q systems? A) constant demand B) constant order spacing C) perpetual inventory system D) variable lead time E) all of the above

C) perpetual inventory system