Question 1

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order

Accepted Answer

The Economic Order Quantity (EOQ) model is used to find the cost-minimizing solution for ordering inventory. The EOQ formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand, $S$ is the ordering cost, and $H$ is the holding cost per unit per year. Plugging in the given values ($D=4000$, $S=20$, $H=4$), we get $\sqrt{\frac{2*4000*20}{4}} = \sqrt{40000} = 200$. Therefore, ordering 200 units per order minimizes the total cost.

Question 2

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Accepted Answer

The average amount of inventory on hand in the Economic Order Quantity (EOQ) model is one-half of the EOQ itself, as inventory levels rise to the EOQ before dropping to zero, averaging out at half the EOQ over time.

Question 3

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

Accepted Answer

Total annual inventory cost can be calculated using the formula: 
Total annual inventory cost = (ordering cost * demand) / EOQ + (holding cost * EOQ) / 2

EOQ can be calculated using the formula: 
EOQ = sqrt((2 * ordering cost * demand) / holding cost)

Plugging in the given values: 
EOQ = sqrt((2 * 20 * 4000) / 4) = 400
Total annual inventory cost = (20 * 4000) / 400 + (4 * 400) / 2 = $800

Therefore, the cost-minimizing solution for this product will cost $800 per year in total annual inventory costs.

Question 4

Which of the following is not an assumption of the economic order quantity model shown below?
Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Accepted Answer

The Economic Order Quantity (EOQ) model assumes that all demand is met without delays, meaning production and use cannot occur simultaneously. This assumption ensures that the inventory level drops to zero before a new order is placed and received.

Question 5

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

The inventory decision rule specifies that when the inventory level decreases to 14 gearboxes, 100 gearboxes will be ordered. Therefore, 14 is the reorder point because it is the inventory level at which the replenishment is triggered, and 100 is the order quantity because it is the number of gearboxes to be ordered.

Question 6

Which of the following statements about the basic EOQ model is False?

Accepted Answer

Doubling the annual demand would result in a fourfold increase in the EOQ, not a doubling. The EOQ is proportional to the square root of annual demand, meaning that if annual demand doubles, the EOQ will increase by a factor of √2 (approximately 1.4), resulting in an order quantity that is approximately 2.8 times as large as the original EOQ.

Question 7

The primary purpose of the basic economic order quantity model shown below is Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Accepted Answer

The basic Economic Order Quantity (EOQ) model aims to minimize the total costs associated with ordering and holding inventory, specifically the setup (or ordering) costs and the holding (or carrying) costs.

Question 8

The EOQ model with quantity discounts attempts to determine

Accepted Answer

The EOQ model with quantity discounts aims to determine the optimal order quantity for multiple price breaks. Thus, it seeks to find the number of units to order that will minimize total inventory costs, including ordering costs and holding costs, while taking into account the discounts offered for larger order quantities. Therefore, the correct choice is D, how many units should be ordered.

Question 9

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

Accepted Answer

- A) Correct because the reorder point is indeed the specific inventory level at which an order is placed to replenish stock.- B) Correct because even with constant lead time and demand, a reorder point is necessary to ensure stock is replenished before it runs out.- C) Correct because the reorder point formula is $d \times L + \text{Safety Stock}$, where $d$ is the demand rate and $L$ is the lead time. The presence of safety stock increases the reorder point beyond just $d \times L$.- D) Correct because the fixed-period model operates on a set time interval for ordering rather than inventory levels reaching a specific point, thus it does not use a reorder point in the traditional sense.

Question 10

Which of the following statements about the basic EOQ model is true?

Accepted Answer

All the statements A, B, C, and D correctly describe the behavior of the Economic Order Quantity (EOQ) model in response to changes in its parameters. Doubling ordering costs or annual demand increases the EOQ, while an increase in carrying costs decreases it. Doubling annual demand also increases the number of orders per year.

Question 11

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

Accepted Answer

The production order quantity is not directly affected by the ratio of demand rate to production rate; rather, it is determined by factors like setup costs, holding costs, and demand rate.

Question 12

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

Accepted Answer

The formula to calculate EOQ is: 
EOQ = sqrt((2DS)/H)
where 
D = annual demand
S = ordering cost per order
H = holding cost per unit per year

If the ordering cost decreases from $90 to $10, the new EOQ will be:

EOQnew = sqrt((2DS)/H) = sqrt((2D(10))/H) = sqrt(20D/H)

Now, we don't know the value of D or H, but we do know that the only variable that has changed is S (ordering cost). Since S decreased by a factor of 9 (from $90 to $10), the new EOQ will increase by a factor of the square root of 9, which is 3. Therefore, the revised EOQ is one-third as large as the original EOQ (40), which is 13.33 or approximately 13.

Question 13

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will

Accepted Answer

According to the EOQ formula, EOQ = sqrt((2DS)/H), where D is the annual demand, S is the ordering cost, and H is the holding cost per unit. If S doubles, the EOQ formula becomes EOQ = sqrt((4DS)/H), which can be simplified to EOQ = sqrt(2)*sqrt(DS/H). Therefore, the EOQ will increase by about 41% (i.e., sqrt(2) = 1.4142).

Question 14

A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

Accepted Answer

The answer of A certain type of computer costs $1,000,...

Question 15

A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is

Accepted Answer

The Economic Order Quantity (EOQ) formula includes the square root of the demand in its calculation. Therefore, if demand increases by 50%, the EOQ will increase, but by less than 50% because the increase is under a square root.

Question 16

Most inventory models attempt to minimize

Accepted Answer

Most inventory models aim to minimize total inventory based costs, which include ordering costs, holding costs, and stockout costs. While minimizing the likelihood of a stockout and the number of orders placed are also important factors in inventory management, they are not the primary objective of most inventory models. The number of items ordered and the safety stock can also be important considerations in inventory management, but they are not necessarily the main focus of inventory models.

Question 17

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is

Accepted Answer

The answer of For a certain item, the cost-minimizing order...

Question 18

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 10 and the daily production rate is 100. The production order quantity for this problem is approximately

Accepted Answer

The production order quantity formula is:

$Q=\sqrt{\frac{2DS}{H}}$

where 
D = annual demand
S = setup cost
H = holding cost per unit per year

In this case, 
D = 3650 units
S = $50
H = $12 per unit per year

We need to convert the annual demand to daily demand by dividing by the number of working days in a year, assuming that demand is uniform throughout the year:

Daily demand = Annual demand / number of working days
= 3650 / 250 (assuming 250 working days in a year)
= 14.6 units per day

The production rate is given as 100 units per day, so we have:

$Q=\sqrt{\frac{2	imes 14.6	imes 50}{12}}$
= 183.9

Rounding up to the nearest integer, we have:

Answer: C, 184

Question 19

In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately

Accepted Answer

EOQ formula is given as
EOQ = √((2DS)/H)

Here,
D = 6000 per year
S = $100
H = $5 per unit per month = $60 per unit per year

Hence, EOQ = √((2*6000*100)/60) = 141.42 ≈ 141

Therefore, the best choice is C with the calculated EOQ value.

Question 20

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

Accepted Answer

The production order quantity model relaxes the assumption that all the order quantity is received at one time, allowing for partial deliveries over time. None of the other statements are true regarding this model.

Quiz 15: Inventory Management

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

Which of the following is not an assumption of the economic order quantity model shown below? Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

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?

Which of the following statements about the basic EOQ model is False?

The primary purpose of the basic economic order quantity model shown below is Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

The EOQ model with quantity discounts attempts to determine

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

Which of the following statements about the basic EOQ model is true?

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

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will

A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is

Most inventory models attempt to minimize

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is

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 10 and the daily production rate is 100. The production order quantity for this problem is approximately

In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately

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

Quiz 15: Inventory Management

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = 2⋅D⋅SH\sqrt { \frac { 2 \cdot D \cdot S } { H } }H2⋅D⋅S​​

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

Which of the following is not an assumption of the economic order quantity model shown below? Q* = 2⋅D⋅SH\sqrt { \frac { 2 \cdot D \cdot S } { H } }H2⋅D⋅S​​

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?

Which of the following statements about the basic EOQ model is False?

The primary purpose of the basic economic order quantity model shown below is Q* = 2⋅D⋅SH\sqrt { \frac { 2 \cdot D \cdot S } { H } }H2⋅D⋅S​​

The EOQ model with quantity discounts attempts to determine

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

Which of the following statements about the basic EOQ model is true?

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

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will

A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is

Most inventory models attempt to minimize

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is

In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately

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

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Which of the following is not an assumption of the economic order quantity model shown below? Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

The primary purpose of the basic economic order quantity model shown below is Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$