Question 1

A factory in Syria has the following information: reorder level 1,600 units; EQQ 32,000 units; minimum usage 600 units; minimum lead time 3 weeks. Calculate the maximum inventory level L_Max. A) 32,000 B) 31,800 C) 31,600 D) 31,400

Accepted Answer

The maximum inventory level is calculated as: Reorder Level + Economic Order Quantity - (Minimum Usage x Minimum Lead Time) = 1,600 + 32,000 - (600 x 3) = 31,800 units.

Question 2

A Jordanian company has to meet a regular demand of 6000 units per year. Each time they place an order for 450 units of stock it costs JOD 20 (Jordanian Dinar) and it costs JOD 0.10 to hold a unit of stock for a year. Using the basic model, calculate the total inventory cost for a year (to nearest whole JOD)

A) JOD 276
B) JOD 281
C) JOD 289
D) JOD 293

JOD 289

Accepted Answer

The total inventory cost for a year is the sum of the ordering cost and the holding cost. The ordering cost is JOD 20 per order, and the holding cost is JOD 0.10 per unit per year. The company places 6000/450 = 13.33 orders per year, so the total ordering cost is 13.33 * JOD 20 = JOD 266.67. The company holds an average of 450/2 = 225 units of stock throughout the year, so the total holding cost is 225 * JOD 0.10 = JOD 22.50. Therefore, the total inventory cost for a year is JOD 266.67 + JOD 22.50 = JOD 289.17, which rounds to JOD 289.

Question 3

A company knows that its EOQ is 180 units, that its holding cost is AED 2 and that the order cost is AED 90. Calculate the annual demand for its product.&#10;A) 340&#10;B) 360&#10;C) 380&#10;D) 400

Accepted Answer

The Economic Order Quantity (EOQ) formula is given by $EOQ = \sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the order cost, and $H$ is the holding cost per unit per year. Rearranging the formula to solve for $D$, we get $D = \frac{EOQ^2 \cdot H}{2S}$. Substituting the given values, $D = \frac{180^2 \cdot 2}{2 \cdot 90} = 360$.

Question 4

Which of the following options is the BEST definition of Safety Stock?&#10;A) A level of stock that is used to sign the need to replenish stock&#10;B) A level of stock above which stocks are too high&#10;C) A level of stock kept to cover fluctuations in demand during lead time&#10;D) An amount by which stock levels are increased during replenishment

Accepted Answer

Safety stock is essentially a buffer of inventory kept to prevent stockouts and shortages due to uncertainties in demand and supply lead times. It covers fluctuations in demand during the replenishment lead time, ensuring that operations can continue smoothly without interruption.

Question 5

Which of the following options is NOT a reason why an inventory must be carried?&#10;A) To manage unexpected fluctuations in demand&#10;B) To take advantage of bulk purchasing discounts&#10;C) In case of emergency shortage situations&#10;D) To allow stock to be easily counted

Accepted Answer

Inventory is primarily carried to manage demand fluctuations, take advantage of bulk purchasing, and prepare for emergency shortages. Counting stock is a logistical necessity but not a reason for maintaining inventory levels.

Question 6

Calculate the Economic Batch Quantity (EBQ) for a company with annual demand of 4,000 units; a production rate of 5,500 units per year; a production run setup cost of €20 and a holding cost of €0.1 per year (0 decimal places).

A) 2286
B) 2346
C) 2393
D) 2422

Accepted Answer

The answer of Calculate the Economic Batch Quantity (EBQ) for...

Question 7

Which factor is given by the equation ?&#10;A) Length of inventory cycle&#10;B) Economic Ordering Quantity&#10;C) Economic Batch Quantity&#10;D) Average inventory level

Accepted Answer

The answer of Which factor is given by the equation...

Question 8

What is the Economic Ordering Quantity (EOQ) for a company with annual demand of 5,000 units, an order cost of $35 and a holding cost of $0.25 (to nearest whole number).&#10;A) 110&#10;B) 115&#10;C) 120&#10;D) 125

Accepted Answer

The answer of What is the Economic Ordering Quantity (EOQ)...

Question 9

What name is given to the external order quantity that minimises inventory costs?&#10;A) Economic Ordering Quantity&#10;B) Efficient Quantity&#10;C) Economic Batch Quantity&#10;D) Optimum Quantity

Accepted Answer

The Economic Ordering Quantity (EOQ) is the term used to describe the ideal quantity of inventory to order that minimizes total inventory costs, including ordering and holding costs.

Question 10

Which option is NOT a cost associated with inventories?&#10;A) Stockout costs&#10;B) Overhead costs&#10;C) Replenishment costs&#10;D) Holding costs

Accepted Answer

Overhead costs are general business expenses not directly tied to inventory, while stockout, replenishment, and holding costs are directly related to inventory management.

Deck 37: Inventory Control