Question 1

In the quantity discount model, with carrying cost stated as a percentage of unit purchase price, in order for the EOQ of the lowest curve to be optimum, it must

Accepted Answer

A)  have the lowest total cost.
B)  be in a feasible range.
C)  be to the left of the price break quantity for that price.
D)  have the largest quantity compared to other EOQs.
E)  have smaller ordering costs than the others.F) A) and B)
G) A) and C)

Question 2

The rate of demand is an important factor in determining the ROP.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following are not types of inventory?

Accepted Answer

A)  customer orders
B)  raw materials
C)  work-in-progress
D)  tools
E)  goods in transitF) C) and D)
G) B) and E)

Question 4

In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will

Accepted Answer

A)  double.
B)  increase, but not double.
C)  decrease by a factor of 2.
D)  remain the same.
E)  increase, but more information is needed to calculate exactly how much.F) A) and E)
G) B) and E)

Question 5

In an A-B-C system, the typical percentage of the number of items in inventory that is classified as A items is about

Accepted Answer

A)  10.
B)  30.
C)  50.
D)  70.
E)  90.F) None of the above
G) C) and D)

Question 6

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves

Accepted Answer

A)  line up.
B)  equal zero.
C)  do not line up.
D)  cannot be calculated.
E)  depend on the percentage assigned.F) C) and E)
G) A) and B)

Question 7

Which system keeps track of the items removed from inventory in order to provide real-time levels?

Accepted Answer

A)  interval
B)  periodic
C)  perpetual
D)  estimated
E)  scheduledF) B) and E)
G) A) and E)

Question 8

In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

Accepted Answer

A) True 
 B)False

Question 9

Profit margins tend to be inversely related to inventory turns.

Accepted Answer

A) True 
 B)False

Question 10

Because price is not a factor in the EOQ formula, quantity discounts will not affect EOQ calculations.

Accepted Answer

A) True 
 B)False

Question 11

An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.

Accepted Answer

A) True 
 B)False

Question 12

What are the two functions that management must be concerned with in regard to inventory?

Accepted Answer

A)  estimating costs / developing an inventory counting system
B)  creating accurate forecasts / communicating with the entire supply chain
C)  tracking inventory / developing an operations strategy
D)  establishing a classification system / creating a perpetual inventory system
E)  establishing a system to track items / making decisions about the quantity and when to orderF) D) and E)
G) B) and C)

Question 13

All of the following are possible reasons for using the fixed-order-interval model except

Accepted Answer

A)  supplier policy encourages use.
B)  grouping orders can save in shipping costs.
C)  the required safety stock is lower than with an EOQ/ROP model.
D)  it is suited to periodic checks of inventory levels rather than continuous monitoring.
E)  continuous monitoring is not practical.F) None of the above
G) B) and E)

Question 14

Cycle stock inventory is intended to deal with

Accepted Answer

A)  excess costs.
B)  shortage costs.
C)  stockouts.
D)  expected demand.
E)  quantity discounts.F) A) and B)
G) All of the above

Question 15

The total cost curve is relatively flat near the EOQ.

Accepted Answer

A) True 
 B)False

Question 16

Which one of these would not be a factor in determining the reorder point?

Accepted Answer

A)  the EOQ
B)  the lead time
C)  the variability of demand
D)  the demand or usage rate
E)  all are factorsF) A) and D)
G) C) and D)

Question 17

In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately

Accepted Answer

A)  11.
B)  20.
C)  24.
D)  28.
E)  375.F) A) and B)
G) D) and E)

Question 18

The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.

Accepted Answer

A) True 
 B)False

Question 19

The EOQ model is most relevant for which one of the following?

Accepted Answer

A)  ordering items with dependent demand
B)  determination of safety stock
C)  ordering perishable items
D)  determining fixed-interval order quantities
E)  determining fixed order quantitiesF) C) and D)
G) B) and C)

Question 20

The objective of inventory management is to minimize the cost of holding inventory.

Accepted Answer

A) True 
 B)False

Exam 12: Inventory Management

In the quantity discount model, with carrying cost stated as a percentage of unit purchase price, in order for the EOQ of the lowest curve to be optimum, it must

Correct AnswerverifiedShow Answer

Which system keeps track of the items removed from inventory in order to provide real-time levels?

Correct AnswerverifiedShow Answer

In an A-B-C system, the typical percentage of the number of items in inventory that is classified as A items is about

Correct AnswerverifiedShow Answer

An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.

Correct AnswerverifiedShow Answer

Because price is not a factor in the EOQ formula, quantity discounts will not affect EOQ calculations.

Correct AnswerverifiedShow Answer

The rate of demand is an important factor in determining the ROP.

Correct AnswerverifiedShow Answer

What are the two functions that management must be concerned with in regard to inventory?

Correct AnswerverifiedShow Answer

In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately

Correct AnswerverifiedShow Answer

Which of the following are not types of inventory?

Correct AnswerverifiedShow Answer

Profit margins tend to be inversely related to inventory turns.

Correct AnswerverifiedShow Answer

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves

Correct AnswerverifiedShow Answer

The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.

Correct AnswerverifiedShow Answer

In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will

Correct AnswerverifiedShow Answer

Which one of these would not be a factor in determining the reorder point?

Correct AnswerverifiedShow Answer

The objective of inventory management is to minimize the cost of holding inventory.

Correct AnswerverifiedShow Answer

The EOQ model is most relevant for which one of the following?

Correct AnswerverifiedShow Answer

In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

Correct AnswerverifiedShow Answer

The total cost curve is relatively flat near the EOQ.

Correct AnswerverifiedShow Answer

All of the following are possible reasons for using the fixed-order-interval model except

Correct AnswerverifiedShow Answer

Cycle stock inventory is intended to deal with

Correct AnswerverifiedShow Answer

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