Question 1

When quantity discounts are allowed, the cost-minimizing order quantity:

Accepted Answer

Quantity discounts impact the total cost by affecting the product cost component in addition to holding and ordering costs. The cost-minimizing order quantity, therefore, minimizes the sum of all three costs: holding, ordering, and product costs.

Question 2

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

Accepted Answer

The answer of Compare the assumptions of the production order...

Question 3

In some inventory models, the optimal behavior occurs when ordering costs and carrying costs are equal to one another. Provide an example of a model where this rule does not hold; explain how the model's results are optimal anyway.

Accepted Answer

The answer of In some inventory models, the optimal behavior...

Question 4

Consider the all-units quantity discount schedule below.  Which of the following sets of order quantities is guaranteed to contain the optimal solution (i.e., best order quantity)?

Accepted Answer

The optimal solution occurs at the point where the marginal cost (price * discount) equals the marginal benefit (holding cost). Using the given schedule, we can calculate the marginal costs and benefit for each order quantity. Among the answer choices, only {1023, 1500, 2000} contains quantities where the marginal cost equals the marginal benefit, and no other answer choice contains all of these quantities. Therefore, D is the best choice.

Question 5

Consider the all-units quantity discount schedule below. Which of the following CANNOT be the optimal ordering quantity?

Accepted Answer

The answer of Consider the all-units quantity discount schedule below....

Question 6

Consider the all-units quantity discount schedule below. The annual demand is 90,000 units, setup cost is $1000 per order, and annual holding cost is 30% of the unit cost. What is the optimal order quantity?

Accepted Answer

The answer of Consider the all-units quantity discount schedule below....

Question 7

Which of the following statements about quantity discounts is FALSE?

Accepted Answer

The statement "The larger the annual demand, the less attractive a discount schedule will be" is false. In fact, larger annual demand can make a discount schedule more attractive as it can lead to greater savings from ordering larger quantities.

Question 8

Which of the following statements regarding the reorder point is TRUE?

Accepted Answer

All the statements provided are true regarding the reorder point. The reorder point is indeed the quantity that triggers an action to restock an item (A). There is a reorder point even if lead time and demand during lead time are constant because it is necessary to know when to reorder to avoid stockouts (B). The reorder point is larger than d × L (where d is the demand rate and L is the lead time) if safety stock is present to account for variability in demand or lead time (C). A shorter lead time generally implies a smaller reorder point because there is less time during which stockouts can occur, thus less inventory is needed to cover the lead time (D).

Question 9

________ is the time between placement and receipt of an order.

Accepted Answer

The answer of ________ is the time between placement and...

Question 10

________ is extra stock that is carried to serve as a buffer.

Accepted Answer

The answer of ________ is extra stock that is carried...

Question 11

An inventory decision rule states, "When the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is TRUE?

Accepted Answer

According to the inventory decision rule mentioned, the point at which an order should be placed is 14, which is the reorder point. The order quantity is 100, which will be ordered when the inventory level reaches the reorder point. Therefore, option B is the correct answer. The statement does not provide any information about demand during lead time or safety stock levels.

Question 12

A(n) ________ model gives satisfactory answers even with substantial variations in its parameters.

Accepted Answer

The answer of A(n) ________ model gives satisfactory answers even...

Question 13

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this problem?

Accepted Answer

The answer of The assumptions of the production order quantity...

Question 14

In a quantity discount problem, if the savings in annual product cost is smaller than the increase in the sum of annual setup cost and annual holding cost, the discount should be ________.

Accepted Answer

The answer of In a quantity discount problem, if the...

Question 15

Which of these statements about the production order quantity model is FALSE?

Accepted Answer

Average inventory is actually less than one-half of the production order quantity in the production order quantity model. The correct statement would be that the maximum inventory level is more than one-half of the production order quantity.

Question 16

In an economic order quantity problem, the total annual cost curve is at its ________ where annual holding costs equal annual setup costs.

Accepted Answer

The answer of In an economic order quantity problem, the...

Question 17

Which of the following statements regarding the production order quantity model is TRUE?

Accepted Answer

The production order quantity model allows for multiple deliveries of the order quantity, relaxing the assumption that all the items are received at one time. Option A is incorrect because the production order quantity model applies to both internally produced items and externally sourced items. Option C is incorrect because the model assumes constant demand rate. Option D is incorrect because the model aims to minimize setup costs and inventory holding costs, not total production costs. Option E is also incorrect as the model aims to balance inventory level with setup costs, not just minimize inventory.

Question 18

In the EOQ model, for a given level of demand, annual holding cost is larger as the order quantity is ________.

Accepted Answer

The answer of In the EOQ model, for a given...

Question 19

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50. The production order quantity for this problem is approximately 750 units. What is the average inventory for this problem?

Accepted Answer

The answer of A production order quantity problem has a...

Question 20

In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Accepted Answer

The answer of In the production order quantity model, the...

Quiz 11: Inventory Management