Question 1

Which of the following is a global RFID challenge?
A)Foreign firms are skeptical about sharing potentially confidential information with foreign businesses.
B)Globally, the RFID industry does not have its own UHF spectrum allocation.
C)UHF signals are reflected by metal and absorbed by water.
D)All of the above.
E)None of these.

Accepted Answer

All of the choices listed represent challenges faced by the RFID (Radio Frequency Identification) industry on a global scale. A) highlights concerns about data privacy and security in international collaborations. B) points to the lack of a unified UHF (Ultra High Frequency) spectrum allocation for RFID, complicating global standardization and interoperability. C) addresses technical limitations of RFID technology, where UHF signals can be impeded by metal and water, affecting performance across different environments.

Question 2

Which of the following cannot be considered as independent demand items?
A)wholesale and retail merchandise items
B)maintenance, repair, and operating supplies at a manufacturing company
C)maintenance, repair, and operating supplies at a service firm
D)raw material items that become part of the final product at a manufacturing firm
E)service industry items such as hospital supplies or office supplies for law firms

Accepted Answer

Raw material items that become part of the final product at a manufacturing firm cannot be considered as independent demand items, as they are dependent on the demand for the final product. The other options listed can be considered as independent demand items.

Question 3

The cost of a widget is $5,and the carrying rate is 40%; cost of processing an order is $25,annual demand is for 400 widgets,and supply and usage patterns are stable.What is the economic order quantity (EOQ)?
A)5
B)20
C)25
D)100
E)200

Accepted Answer

Using the formula for EOQ:
EOQ= √((2DS)/H)
Where:
D= annual demand (400)
S= cost of placing an order ($25)
H= carrying rate (40% of $5 = $2)
EOQ= √((2*400*25)/2) = 100 widgets.

Therefore, the best choice is D, as it minimizes inventory costs by ensuring that the least amount of money is spent on carrying costs, ordering costs, and shortages.

Question 4

Classify the following inventory items as either A,B,or C items according to the ABC analysis method:? $\begin{array}{|l|r|r|l|l|}
\hline {\text { Item \# }} & {\text { Annual Sales }} & \text { Unit Cost } & \begin{array}{l}
\text { Current } \
\text { Inventory } \
\text { Value } \$
\end{array} & \text { Classification } \
\hline{ 1 } & 130 \text { units } & \$ 4.00 & & \
\hline 2 & 400 \text { units } & 15.30 & & \
\hline 3 & 25 \text { units } & 17.00 & & \
\hline 4 & 1320 \text { units } & 1.25 & & \
\hline 5 & 90 \text { units } & 2.10 & & \
\hline
\end{array}$
A)item 1 (B), item 2 (A), item 3 (A), item 4 (C), item 5 (C)
B)item 1 (C), item 2 (B), item 3 (C), item 4 (A), item 5 (C)
C)item 1 (A), item 2 (B), item 3 (C), item 4 (A), item 5 (B)
D)item 1 (B), item 2 (C), item 3 (B), item 4 (C), item 5 (A)
E)item 1 (C), item 2 (A), item 3 (C), item 4 (B), item 5 (C)

Accepted Answer

The answer of Classify the following inventory items as either...

Question 5

Dependent demand and independent demand items differ in that
I.for any product,all components are dependent-demand items
II.the need for independent-demand items is forecast
III.the need for dependent-demand items is calculated
A)I only
B)I & II only
C)I & III only
D)II & III only
E)I, II & III

Accepted Answer

The answer of Dependent demand and independent demand items differ...

Question 6

Which of the following would most likely be considered a dependent demand item?
A)Bicycle tires used to assemble a bicycle
B)Television (TV)
C)Couch
D)Lawn Mower

Accepted Answer

Bicycle tires are a component used in the assembly of a bicycle, which is the final product. Therefore, the demand for bicycle tires is dependent on the demand for bicycles.

Question 7

____,such as lubricants for machines,are used in the production process,but do not become parts of the final products.
A)Raw materials
B)Work-in-process
C)Maintenance, repair and operating supplies
D)Finished goods
E)Cycle stock

Accepted Answer

Maintenance, repair and operating supplies (MRO) are materials and supplies used in the production process but do not become part of the final product. Examples can include lubricants, cleaning supplies, and spare parts for machinery. Raw materials are materials that are used to create the final product, work-in-process is partially completed products that are still being worked on, finished goods are the final products that are ready to be sold, and cycle stock is inventory that is regularly maintained to meet regular demand fluctuations.

Question 8

ABC Inventory Matrix
Use the graph below to answer the question(s). 
-In the ABC Inventory Matrix,inventory in area Y suggests
A)under-stocked A and B items.
B)under-stocked B and C items.
C)overstocked A and B items.
D)over-stocked B and C items.
E)inventory matches sales.

Accepted Answer

The answer of ABC Inventory Matrix
Use the graph below to...

Question 9

Companies hold a supply of inventory for all of the following reasons EXCEPT:
A)meet variation in product demand
B)increase production change/setup costs
C)allow production scheduling flexibility
D)purchase in bulk to take advantage of quantity discounts
E)maintain independence of operations (Decoupling)

Accepted Answer

Holding inventory does not increase production change/setup costs. Instead, it may help reduce these costs by allowing for more efficient production scheduling and reducing the number of changeovers.

Question 10

The primary purpose of the basic economic order quantity model is
A)to calculate the reorder point, so that replenishments take place at the proper time
B)to minimize the sum of carrying cost and holding cost
C)to maximize the customer service level
D)to minimize the sum of setup cost and holding cost
E)to calculate the optimum safety stock

Accepted Answer

The basic Economic Order Quantity (EOQ) model aims to minimize the total cost of inventory management by finding the ideal order quantity that minimizes the sum of setup costs (or ordering costs) and holding costs (or carrying costs).

Question 11

ABC Inventory Matrix
Use the graph below to answer the question(s). 
-In the ABC Inventory Matrix,inventory in area Z suggests
A)under-stocked A and B items.
B)under-stocked B and C items.
C)overstocked A and B items.
D)over-stocked B and C items.
E)inventory matches sales.

Accepted Answer

In the ABC Inventory Matrix, inventory in area Z suggests over-stocked B and C items, indicating that there is more inventory than demand for these less critical or lower value items.

Question 12

Which of the following is a disadvantage of excessive inventory?
A)it creates an unnecessary waste of scarce resources.
B)It leads to higher inventory ordering cost.
C)It leads to lower average inventory.
D)It eliminates cycle stock.
E)It reduces the need to conduct cycle count.

Accepted Answer

Excessive inventory can lead to a waste of resources as it ties up valuable working capital and storage space. It also leads to higher carrying costs such as obsolescence, storage, and insurance costs.

Question 13

If an item is ordered at its economic order quantity,the annual carrying cost should be:
A)slightly less than the annual ordering cost.
B)equal to the annual ordering cost.
C)twice the annual purchase price.
D)the square root of the annual ordering cost.
E)cannot be determined because there is insufficient information provided.

Accepted Answer

The economic order quantity (EOQ) model is designed to minimize the total inventory costs, which include both ordering costs and carrying costs. At the EOQ, the annual carrying cost is equal to the annual ordering cost. This balance is what defines the economic order quantity.

Question 14

Which of the following is not an assumption of the economic order quantity model?
A)Demand is known, constant, and independent.
B)Lead time is known and constant.
C)Quantity discounts are not possible.
D)Production and use can occur simultaneously.
E)The only variable costs are setup cost and holding (or carrying) cost.

Accepted Answer

The economic order quantity (EOQ) model assumes that demand is known and constant, lead time is known and constant, quantity discounts are not considered, and the only variable costs are setup cost and holding cost. It does not assume that production and use can occur simultaneously; this assumption is not part of the EOQ model.

Question 15

Which of the following is not an example of an ordering cost for products purchased from a supplier?
A)the cost of transmitting the order
B)the cost of receiving the product
C)the cost associated with processing the invoice
D)the cost of pilferage while in storage
E)the cost of clerical staff for preparing the purchase

Accepted Answer

Pilferage while in storage is a cost related to the physical protection of the product and not specifically related to the ordering process. The other options are all examples of costs incurred during the ordering process.

Question 16

The EOQ model with quantity discounts attempts to determine
A)what is the lowest purchasing price.
B)whether to use fixed-quantity or fixed period order policy.
C)how many units should be ordered.
D)what is the shortest lead time.
E)what is the lowest amount of inventory necessary to satisfy a certain service level.

Accepted Answer

The EOQ model with quantity discounts is used to determine the most cost-effective order quantity when the price of the item varies based on the quantity ordered. Thus, the goal is to determine how many units should be ordered to minimize the total inventory costs, which includes ordering costs, holding costs, and the cost of the product itself. Therefore, the correct choice is C, which is how many units should be ordered. The other options are not the primary focus of the EOQ model with quantity discounts.

Question 17

What inventory factor may be omitted from the basic EOQ derivation because it is a constant?
A)Annual order-processing cost
B)Annual purchase cost of goods
C)Annual capital cost
D)Annual setup costs
E)all of these

Accepted Answer

The annual purchase cost of goods is a constant since it remains unchanged despite the number of orders placed. Therefore, it may be omitted from the basic EOQ derivation. However, annual order-processing cost, annual capital cost, and annual setup costs are all variable factors that should be included in the EOQ calculation.

Question 18

If your company had an annual purchase cost of items equal to $2,000,000,an annual holding cost of $150,000 and an annual ordering cost of $750,000 this scenario would reveal that:
A)Your fixed lot size was lower than the EOQ
B)Your fixed lot size was equal to the EOQ
C)Your fixed lot size was higher than the EOQ
D)Nothing because there is insufficient information to discern where the EOQ would be.

Accepted Answer

The answer of If your company had an annual purchase...

Question 19

Use this information below to calculate the optimal order quantity:Annual demand for backpacks is 43,000 unitsThe cost to place an order is $220The per unit cost of the item is $60.00The annual holding rate is 37.5%Choose the closest answer.
A)920 units
B)250 units
C)710 units
D)830 units

Accepted Answer

The answer of Use this information below to calculate the...

Question 20

Which one of the following statements regarding the economic order quantity is true?
A)The EOQ model combines several different item orders to the same supplier.
B)If an order quantity is larger than the EOQ, the annual holding cost exceeds the annual ordering cost.
C)The EOQ model assumes a variable demand pattern.
D)When the interest rate drops, both the holding cost and the EOQ decreases.
E)EOQ is used to determine the optimum shipping quantity.

Accepted Answer

The EOQ model calculates the optimal order quantity that minimizes the total cost of inventory, including both ordering and holding costs. If an order quantity is larger than the EOQ, the annual holding cost exceeds the annual ordering cost. This means that the total cost of inventory would be higher with a larger order quantity than with the EOQ. The other statements are false.

Quiz 7: Inventory Management

Which of the following is a global RFID challenge?

Which of the following cannot be considered as independent demand items?

The cost of a widget is $5,and the carrying rate is 40%; cost of processing an order is $25,annual demand is for 400 widgets,and supply and usage patterns are stable.What is the economic order quantity (EOQ) ?

Dependent demand and independent demand items differ in that I.for any product,all components are dependent-demand items II.the need for independent-demand items is forecast III.the need for dependent-demand items is calculated

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

____,such as lubricants for machines,are used in the production process,but do not become parts of the final products.

ABC Inventory Matrix Use the graph below to answer the question(s) . -In the ABC Inventory Matrix,inventory in area Y suggests

Companies hold a supply of inventory for all of the following reasons EXCEPT:

The primary purpose of the basic economic order quantity model is

ABC Inventory Matrix Use the graph below to answer the question(s) . -In the ABC Inventory Matrix,inventory in area Z suggests

Which of the following is a disadvantage of excessive inventory?

If an item is ordered at its economic order quantity,the annual carrying cost should be:

Which of the following is not an assumption of the economic order quantity model?

Which of the following is not an example of an ordering cost for products purchased from a supplier?

The EOQ model with quantity discounts attempts to determine

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

If your company had an annual purchase cost of items equal to $2,000,000,an annual holding cost of $150,000 and an annual ordering cost of $750,000 this scenario would reveal that:

Use this information below to calculate the optimal order quantity:Annual demand for backpacks is 43,000 unitsThe cost to place an order is $220The per unit cost of the item is $60.00The annual holding rate is 37.5%Choose the closest answer.

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