MG403 Final Quiz Questions
A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity
110 = square root of (2 X 10000 X 150) / .25X1000
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. The production order quantity for this problem is approximately a. 139 b. 174 c. 184 d. 365 e. 548
184 =square root of ( 2 X 360 X 50)/ (1- 10/100) X 12
Most inventory models attempt to minimize a. the likelihood of a stockout b. the number of items ordered c. total inventory based costs d. the number of orders placed e. the safety stock
Total inventory based on cost!
In the quantity discount model, it is possible to have cost-minimizing solutions where annual ordering costs do not equal annual carrying costs
True
Units of safety stock are additions to the reorder point that allow for variability in the rate of demand, the length of lead time, or both.
True
The fixed-period inventory model requires more safety stock than the fixed-quantity models because
a stockout can occur during the review period as well as during the lead time
A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is
increased by less than 50%
Which of the following is not an assumption of the basic fixed- order quantity model? a. demand is known, constant, and independent b. lead time is known and constant c. quantity discounts are not possible d. production and use can occur simultaneously e. the only variable costs are setup costs and holding (or carrying) costs
production and use can occur simultaneously ( this is a production order quantity model assumption)
The Proper quantity of safety stock is typically determined by
setting the level of safety stock so that a given stockout risk is not exceeded
The primary goal in the basic fixed order quantity model is
to minimize the sum or setup costs and holding costs
