Question 1

Average demand for a particular item is 1,200 units per year. It costs $100 to place an order for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed-order-interval model is chosen in this instance, how often (on average) will this item be ordered?

Accepted Answer

A)  once a month
B)  once every other month
C)  twice a month
D)  twice every three months
E)  three times every two monthsF) C) and E)
G) None of the above

Question 2

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. What is the economic order quantity for pepperoni?

Accepted Answer

A)  20 pounds
B)  40 pounds
C)  60 pounds
D)  80 pounds
E)  100 poundsF) A) and D)
G) None of the above

Question 3

The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.

Accepted Answer

A) True 
 B)False

Question 4

The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following interactions with vendors would potentially lead to inventory reductions?

Accepted Answer

A)  reduced lead times
B)  increased safety stock
C)  less frequent purchases
D)  larger batch quantities
E)  longer order intervalsF) A) and B)
G) All of the above

Question 6

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

Accepted Answer

A) True 
 B)False

Question 7

The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.

Accepted Answer

A) True 
 B)False

Question 8

Annual ordering cost is inversely related to order size.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not true for the economic production quantity model?

Accepted Answer

A)  Usage rate is constant.
B)  Production rate exceeds usage rate.
C)  Run size exceeds maximum inventory.
D)  There are no ordering or setup costs.
E)  Average inventory is one-half maximum inventory.F) B) and D)
G) A) and B)

Question 10

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the maximum inventory would be approximately

Accepted Answer

A)  70 percent higher.
B)  30 percent higher.
C)  the same.
D)  30 percent lower.
E)  70 percent lower.F) A) and E)
G) A) and D)

Question 11

Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed.

Accepted Answer

A)  greater than the EOQ
B)  equal to the EOQ
C)  smaller than the EOQ
D)  greater than or equal to the EOQ
E)  smaller than or equal to the EOQF) C) and E)
G) C) and D)

Question 12

The two basic issues in inventory are how much to order and when to order.

Accepted Answer

A) True 
 B)False

Question 13

Which one of the following is not generally a determinant of the reorder point?

Accepted Answer

A)  rate of demand
B)  length of lead time
C)  lead time variability
D)  stockout risk
E)  purchase costF) A) and C)
G) A) and B)

Question 14

The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

Accepted Answer

A) True 
 B)False

Exam 12: Inventory Management

The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.

Correct Answer
verified

Annual ordering cost is inversely related to order size.

Correct Answer
verified

Correct Answer
verified

The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

Correct Answer
verified

Which one of the following is not generally a determinant of the reorder point?

Correct Answer
verified

Which of the following interactions with vendors would potentially lead to inventory reductions?

Correct Answer
verified

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the maximum inventory would be approximately

Correct Answer
verified

The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory.

Correct Answer
verified

The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.

Correct Answer
verified

Average demand for a particular item is 1,200 units per year. It costs $100 to place an order for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed-order-interval model is chosen in this instance, how often (on average) will this item be ordered?

Correct Answer
verified

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

Correct Answer
verified

Which of the following is not true for the economic production quantity model?

Correct Answer
verified

The two basic issues in inventory are how much to order and when to order.

Correct Answer
verified

Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed.

Correct Answer
verified

Exam 12: Inventory Management

The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.

Correct AnswerverifiedShow Answer

Annual ordering cost is inversely related to order size.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

Correct AnswerverifiedShow Answer

Which one of the following is not generally a determinant of the reorder point?

Correct AnswerverifiedShow Answer

Which of the following interactions with vendors would potentially lead to inventory reductions?

Correct AnswerverifiedShow Answer

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the maximum inventory would be approximately

Correct AnswerverifiedShow Answer

The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory.

Correct AnswerverifiedShow Answer

The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.

Correct AnswerverifiedShow Answer

Average demand for a particular item is 1,200 units per year. It costs $100 to place an order for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed-order-interval model is chosen in this instance, how often (on average) will this item be ordered?

Correct AnswerverifiedShow Answer

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

Correct AnswerverifiedShow Answer

Which of the following is not true for the economic production quantity model?

Correct AnswerverifiedShow Answer

The two basic issues in inventory are how much to order and when to order.

Correct AnswerverifiedShow Answer

Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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