Question 1

Which of the following would be considered a dependent demand item?

Accepted Answer

A)   Bicycle tires used to assemble a bicycle
B)   Televisions
C)   Furniture
D)   Retail customersE) A) and C)
F) None of the above

Question 2

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

Accepted Answer

A)   2
B)   13
C)   32.
D)   40.
E)   56.F) All of the above
G) C) and E)

Question 3

Which of the following is NOT an assumption of the economic order quantity (EOQ)  model?

Accepted Answer

A)   Demand is known, constant, and independent.
B)   Lead time is known and constant.
C)   Quantity discounts are not possible.
D)   Production and use occur simultaneously.
E)   The only variable costs are setup cost and holding cost.F) None of the above
G) C) and D)

Question 4

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Accepted Answer

A) True 
 B)False

Question 5

Which one of the following statements regarding the economic order quantity (EOQ)  is true?

Accepted Answer

A)   The EOQ model combines several different item orders to the same supplier.
B)   If an order quantity is larger than the EOQ, then the annual holding cost will exceed the annual ordering cost.
C)   The EOQ model assumes a variable demand pattern.
D)   When the holding cost rate drops, both the annual holding cost and the EOQ decrease.
E)   The EOQ is frequently used to determine the optimum shipping quantity.F) A) and B)
G) A) and E)

Question 6

Cycle counting means to physically count inventory on a periodic basis.

Accepted Answer

A) True 
 B)False

Question 7

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

Accepted Answer

A) True 
 B)False

Question 8

When demand and delivery lead time are known and constant, the reorder point is the ____.

Accepted Answer

A)   demand during the delivery lead time
B)   safety stock
C)   demand during lead time + safety stock
D)   economic order quantity
E)   average inventoryF) B) and E)
G) All of the above

Question 9

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?

Accepted Answer

A)   Annual order-processing cost
B)   Annual purchase cost of goods
C)   Annual capital cost
D)   Annual setup costs
E)   Annual total costsF) B) and E)
G) A) and B)

Question 10

The manager at Robert's Cigars wants to determine the lowest cost order policy given the following purchase discounts offered: cigar costs are $4 each for orders less than 500; $3.50 each for orders of 500 - 1000; and $3.25 each for orders greater than 1000.The order cost = $75, annual demand forecast = 5500 cigars, inventory carrying cost = 30% per year.

Accepted Answer

Step 1
Determine the 3 EOQ’s—
For $4 cig...

Question 11

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

Accepted Answer

A) True 
 B)False

Question 12

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

Accepted Answer

A) True 
 B)False

Question 13

Describe the ABC inventory matrix, and how is it used to manage inventory.

Accepted Answer

An ABC inventory matrix is used to assis...

Question 14

Independent demand is the:

Accepted Answer

A)   Internal demand for all end-item parts and materials.
B)   Demand for a firm's end products.
C)   Forecasted demand for purchased items.
D)   Absolute demand for all items.E) A) and C)
F) None of the above

Question 15

Which of the following is a disadvantage of carrying too much inventory?

Accepted Answer

A)   it creates an unnecessary waste of scarce resources.
B)   it leads to higher annual inventory ordering costs.
C)   it leads to lower average finished goods inventories.
D)   it increases the need to purchase items.
E)   it reduces the need to conduct cycle counts.F) B) and E)
G) B) and D)

Question 16

Dependent demand must be forecasted to be accurate.

Accepted Answer

A) True 
 B)False

Question 17

Which one of the following is NOT a reason for firms to carry inventory?

Accepted Answer

A)   To meet variations in product demand
B)   To increase production change/setup costs
C)   To allow for production scheduling flexibility
D)   To take advantage of quantity discounts
E)   To maintain independence of operationsF) A) and B)
G) A) and C)

Question 18

List five of the assumptions of the EOQ model.

Accepted Answer

a.Demand must be known and constant
b.De...

Question 19

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Accepted Answer

A) True 
 B)False

Question 20

The primary purpose of the basic economic order quantity (EOQ)  model is to:

Accepted Answer

A)   Calculate the reorder point, so that replenishments take place at the proper time
B)   Minimize the sum of purchase cost and holding cost
C)   Maximize the customer service level
D)   Calculate the optimum safety stock level
E)   None of the aboveF) None of the above
G) B) and C)

Exam 7: Inventory Management

Which of the following is NOT an assumption of the economic order quantity (EOQ) model?

Correct Answer
verified

The primary purpose of the basic economic order quantity (EOQ) model is to:

Correct Answer
verified

Describe the ABC inventory matrix, and how is it used to manage inventory.

Correct Answer
verified
An ABC inventory matrix is used to assis...
View Answer

Which of the following is a disadvantage of carrying too much inventory?

Correct Answer
verified

Which one of the following is NOT a reason for firms to carry inventory?

Correct Answer
verified

Which one of the following statements regarding the economic order quantity (EOQ) is true?

Correct Answer
verified

Independent demand is the:

Correct Answer
verified

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Correct Answer
verified

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

Correct Answer
verified

Dependent demand must be forecasted to be accurate.

Correct Answer
verified

Cycle counting means to physically count inventory on a periodic basis.

Correct Answer
verified

Which of the following would be considered a dependent demand item?

Correct Answer
verified

Correct Answer
verified
Step 1
Determine the 3 EOQ’s—
For $4 cig...
View Answer

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

Correct Answer
verified

When demand and delivery lead time are known and constant, the reorder point is the ____.

Correct Answer
verified

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

Correct Answer
verified

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

Correct Answer
verified

List five of the assumptions of the EOQ model.

Correct Answer
verified
a.Demand must be known and constant
b.De...
View Answer

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?

Correct Answer
verified

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Correct Answer
verified

Exam 7: Inventory Management

Which of the following is NOT an assumption of the economic order quantity (EOQ) model?

Correct AnswerverifiedShow Answer

The primary purpose of the basic economic order quantity (EOQ) model is to:

Correct AnswerverifiedShow Answer

Describe the ABC inventory matrix, and how is it used to manage inventory.

Correct AnswerverifiedAn ABC inventory matrix is used to assis...View AnswerShow Answer

Which of the following is a disadvantage of carrying too much inventory?

Correct AnswerverifiedShow Answer

Which one of the following is NOT a reason for firms to carry inventory?

Correct AnswerverifiedShow Answer

Which one of the following statements regarding the economic order quantity (EOQ) is true?

Correct AnswerverifiedShow Answer

Independent demand is the:

Correct AnswerverifiedShow Answer

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Correct AnswerverifiedShow Answer

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

Correct AnswerverifiedShow Answer

Dependent demand must be forecasted to be accurate.

Correct AnswerverifiedShow Answer

Cycle counting means to physically count inventory on a periodic basis.

Correct AnswerverifiedShow Answer

Which of the following would be considered a dependent demand item?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedStep 1Determine the 3 EOQ’s—For $4 cig...View AnswerShow Answer

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

Correct AnswerverifiedShow Answer

When demand and delivery lead time are known and constant, the reorder point is the ____.

Correct AnswerverifiedShow Answer

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

Correct AnswerverifiedShow Answer

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

Correct AnswerverifiedShow Answer

List five of the assumptions of the EOQ model.

Correct Answerverifieda.Demand must be known and constantb.De...View AnswerShow Answer

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?

Correct AnswerverifiedShow Answer

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
An ABC inventory matrix is used to assis...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Step 1
Determine the 3 EOQ’s—
For $4 cig...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
a.Demand must be known and constant
b.De...
View Answer

Correct Answer
verified

Correct Answer
verified