ISDS 3115 CH 12

In the basic EOQ​ model, if D​ = 6000 per​ year, S​ = $100, and holding cost​ = $5 per unit per​ month, what is the economic order​ quantity? A. 141 B. 600 C. 490 D. 100 E. 24

A

In the basic EOQ​ model, if the cost of placing an order​ doubles, and all other values remain​ constant, the EOQ​ will: A. increase by about​ 41%. B. increase by​ 200%. C. increase by​ 100%. D. ​increase, but more data is needed to say by how much. E. either increase or decrease.

A

In the​ single-period inventory​ model, the overage cost is A. cost per unit − salvage value per unit. B. cost per unit − sales price per unit. C. salvage value per unit. D. sales price per unit − cost per unit.

A

The appropriate level of safety stock is typically determined by A. choosing the level of safety stock that assures a given service level. B. carrying sufficient safety stock so as to eliminate all stockouts. C. minimizing the expected stockout cost. D. taking the square root of the economic order quantity.

A

What is the primary purpose of the basic economic order quantity model shown​ below? ​Q*​ = sqr rt (2DS/H) A. to minimize the sum of setup cost and holding cost B. to maximize the customer service level C. to calculate the optimum safety stock D. to minimize the sum of carrying cost and holding cost E. to calculate the reorder​ point, so that replenishments take place at the proper time

A

Which of the following does NOT belong to holding​ costs? A. order processing B. ​pilferage, scrap, and obsolescence C. storage costs D. insurance on inventory

A

Which of the following is NOT a type of​ inventory? A. MRP B. finished goods C. ​work-in-process D. raw material

A

Which of the following would NOT generally be a motive for a firm to hold​ inventories? A. to minimize holding costs B. to decouple various parts of the production process C. to hedge against inflation D. to take advantage of quantity discounts E. to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand

A

A system that keeps track of each withdrawal or addition to inventory continuously is A. a constant monitoring system. B. a perpetual inventory system. C. a continuous inventory system. D. a fixed period system.

B

ABC analysis divides an​ organization's on-hand inventory into three classes based upon A. the number of units on hand. B. annual dollar volume. C. annual demand. D. unit price.

B

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per​ day, and the order lead time is four days. The service level is​ 95%. What should the reorder point​ be? A. about 38 B. more than 40 C. about 32 D. about 18 E. about 24

B

Inventory record accuracy would be decreased by A. cycle counting. B. increasing stockroom accessibility. C. reorder points. D. ABC analysis.

B

The objective of inventory management is to A. provide a selection of goods for anticipated customer demand. B. strike a balance between inventory investment and customer service. C. take advantage of quantity discounts. D. decouple various parts of the production process.

B

What is the cost to prepare a machine or process for​ production? A. holding cost B. setup cost C. preparation cost D. ordering cost

B

Which of the following sets of order quantities is guaranteed to contain the optimal solution​ (i.e., best order​ quantity)? A.​ {3652, 3849,​ 4082, 4364,​ 4714} B. ​{4082, 6000,​ 8000} C. ​{3849, 4082} D. ​{1, 2000,​ 4000, 6000,​ 8000} E. ​{1999, 3849}

B

Which of the following statements regarding the production order quantity model is​ TRUE? A. It minimizes the total production costs. B. It relaxes the assumption that all the order quantity is received at one time. C. It minimizes inventory. D. It relaxes the assumption that the demand rate is constant. E. It applies only to items produced in the​ firm's own production departments.

B

A statistical model applicable when product demand or any other variable is not known but can be specified by means of a probability distribution is referred as A. a quantity discount model. B. the EOQ. C. a probabilistic model. D. a robust model.

C

ABC analysis divides​ on-hand inventory into three​ classes, generally based upon which of the​ following? A. the number of units on hand B. annual demand C. annual dollar volume D. item quality E. unit price

C

All EXCEPT which of the following statements about ABC analysis are​ true? A. ABC analysis suggests that there are the critical few and the trivial many inventory items. B. In ABC​ analysis, inventory may be categorized by measures other than dollar volume. C. ABC analysis suggests that all items require the same high degree of control. D. ABC analysis is an application of the Pareto principle. E. ABC analysis categorizes​ on-hand inventory into three groups based on annual dollar volume.

C

For seasonal​ products, the service level should be set to equal A. overage cost​ / (overage cost minus− shortage​ cost). B. overage cost​ / (overage cost​ + shortage​ cost). C. shortage cost​ / (overage cost​ + shortage​ cost). D. shortage cost​ / (overage cost minus− shortage​ cost).

C

Inventory control models assume that demand for an item is A. always independent on the demand for other items. B. identical to the demand for other items. C. either independent of or dependent on the demand for other items. D. always dependent on the demand for other items.

C

One use of inventory is A. to ensure that item cost is maximized. B. to tightly synchronize a​ firm's production with its​ customers' demand. C. to provide a hedge against inflation. D. to tightly synchronize production and distribution processes.

C

The assumptions of the production order quantity model are met in a situation where annual demand is 3650​ units, setup cost is​ $50, holding cost is​ $12 per unit per​ year, the daily demand rate is 10 and the daily production rate is 100. What is the production order quantity for this​ problem? A. 548 B. 174 C. 184 D. 139 E. 365

C

What is a system for ordering items that have little or no value at the end of a sales​ period? A. EOQ B. ROP C. ​single-period inventory model D. production order quantity model

C

Which of the following does NOT belong to ordering​ costs? A. order processing B. cost of supplies C. interest payments D. clerical support

C

Which of the following is NOT one of the assumptions of​ fixed-period systems? A. Items are independent of one another. B. The only relevant costs are the ordering and holding costs. C. Lead times are variable. D. Lead times are known.

C

Which of the following types of inventory describes inventory that has been purchased but not​ processed? A. ​work-in-process inventory B. ​finished-goods inventory C. raw material inventory D. ​maintenance/repair/operating supply inventory

C

A production order quantity problem has a daily demand rate​ = 10 and a daily production rate​ = 50. The production order quantity for this problem is approximately 612 units. What is the average inventory for this​ problem? A. 300 B. 61 C. 490 D. 245 E. 306

D

A system that triggers ordering on a uniform time basis is called A. a​ fixed-period system. B. a reorder point system. C. an EOQ system. D. a​ fixed-quantity system.

D

ABC analysis is based upon the principle​ that: A. more time should be spent on class​ "C" items because there are many more of them. B. as with grade distributions in many MBA​ courses, there should be more​ medium-level "B" items than either​ "A" or​ "C" items. C. an item is critical if its usage is high. D. there are usually a few critical​ items, and many items that E. all items in inventory must be monitored very closely.

D

A​ single-period inventory model is NOT applicable for A. newspapers. B. milk. C. seasonal goods. D. furniture.

D

The fixed−period inventory system requires more safety stock than a​ fixed-quantity system​ because: A. this model is used for products that require very high service levels. B. replenishment is not instantaneous. C. setup costs and holding costs are large. D. a stockout can occur during the review period as well as during the lead time. E. this model is used for products that have large standard deviations of demand.

D

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

D

Which of the following should be higher in P systems than Q​ systems? A. demand B. order spacing C. lead time D. safety stock E. order size

D

Which of the following statements about ABC analysis is​ FALSE? A. ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. B. In ABC​ analysis, forecasting methods for​ "C" items may be less sophisticated than for​ "A" items. C. In ABC​ analysis, "A" items should have tighter physical inventory control than​ "B" or​ "C" items have. D. ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. E. Criteria other than annual dollar​ volume, such as high holding cost or delivery​ problems, can determine item classification in ABC analysis.

D

Which of the following would NOT generally be a motive for a firm to hold​ inventories? A. to take advantage of quantity discounts B. to decouple various parts of the production process C. to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand D. to minimize holding costs E. to hedge against inflation

D

An advantage of the​ fixed-period inventory system is​ that: A. no inventory records are required. B. the average inventory level is reduced. C. safety stock will be lower than it would be under a​ fixed-quantity inventory system. D. orders usually are for smaller order quantities. E. there is no physical count of inventory items when an item is withdrawn.

E

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

E

Which of the following statements about quantity discounts is​ FALSE? A. The smaller the ordering​ cost, the less attractive a discount schedule will be. B. The​ cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. C. In inventory​ management, item cost becomes relevant to order quantity decisions when a quantity discount is available. D. If carrying costs are expressed as a percentage of​ value, EOQ is larger at each lower price in the discount schedule. E. The larger the annual​ demand, the less attractive a discount schedule will be.

E

Which of the following statements about the basic EOQ model is​ TRUE? A. If annual demand were to​ double, the number of orders per year would increase. B. If the carrying cost were to​ increase, the EOQ would fall. C. If the ordering cost were to​ double, the EOQ would rise. D. If annual demand were to​ double, the EOQ would increase. E. All of the above statements are true.

E