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Exam 16: Inventory Management

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Question 21

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A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity then the total annual inventory cost for napkins is

A) $62,500.
B) $5,000.
C) $2,500.
D) $1250.

E) None of the above
F) All of the above

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Question 22

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Which of the following is not an assumption of the EOQ model?

A) Demand is known and constant.
B) No shortages are allowed.
C) Lead time is determined by quantity ordered.
D) Order quantity is received all at once.

E) A) and C)
F) None of the above

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Question 23

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The periodic inventory system is often preferred for high quantity,low value items.

Hedging involves buying larger amounts of inventory in anticipation of future price increases.

Inventory management is concerned with how much to order and when to order.

The time between orders is variable and the order quantity is constant in the periodic inventory system.

Continuous inventory systems are also referred to as a fixed-order-quantity system.

The production quantity model,a variation of the basic EOQ model,assumes non-instantaneous replenishment.

Seasonal inventory allows a firm to maintain a smooth production flow throughout the year.

Dependent demand items consist of component parts or materials used in the production process to produce a final product.

The average inventory can be calculated by dividing the annual demand,D,by 2.

Finished product is an example of a dependent demand item.

Which of the following is not an example of inventory carried to satisfy independent demand?

The quantity discount model evaluates whether using an order size that qualifies for a price discount is always less cost effective than using the economic order quantity.

Annual demand for a product is 40,000 units.The product is used at a constant rate over the 365 days the company is open every year.The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00.If the company orders according to the economic order quantity (EOQ) formula,then the time between orders (order cycle time) is

A company may purchase larger amounts of inventory for all the following reasons except

As the level of inventory increases to provide better customer service,quality-related customer service costs decrease.

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity each time an order is placed,then ___ orders are placed during the year.

Receiving,handling,and shipping costs are examples of

In general,as the order size increases