Question 1

Discuss the assumptions of the EOQ model.

Accepted Answer

The assumptions on which the EOQ is based are as follows: demand is relatively constant and is known, the item is produced or purchased in lots or batches and not continuously, order preparation costs and inventory- carrying costs are constant and known, and replacement occurs all at once.

Question 2

A variation on the fixed- order quantity system is the mix- max system where an order is placed with the quantity available rises above the order point.

Accepted Answer

In a min-max system, an order is placed when the quantity available falls below the minimum level, not when it rises above the order point.

Question 3

If the order point is 100 units, the maximum is 300 units, and the quantity actually available when the order is placed is 75, what is the order quantity?
A) 220
B) 80
C) 200
D) 225

Accepted Answer

The order quantity is calculated as the difference between the maximum inventory level and the quantity available when the order is placed. Therefore, 300 (maximum) - 75 (available) = 225 units.

Question 4

There is an order quantity in which the sum of the ____________ is a minimum.
A) carrying cost and the annual usage in units
B) ordering costs and the annual usage in units
C) ordering costs and carrying costs
D) carrying costs and unit cost

Accepted Answer

The Economic Order Quantity (EOQ) model aims to minimize the total cost, which is the sum of ordering costs and carrying costs.

Question 5

The cost of placing a manufacturing order is made up from____________ .
A) setup costs
B) production control costs
C) production control and setup costs
D) neither production control nor setup costs

Accepted Answer

The cost of placing a manufacturing order typically includes both setup costs and production control costs, as these are necessary for initiating and managing the production process.

Question 6

The annual demand for a SKU is 10,075 units and it is ordered in quantities of 650 units. Calculate the average inventory and the number of orders placed per year.

Accepted Answer

The answer of The annual demand for a SKU is...

Question 7

The buyer must decide whether to accept a quantity discount and must consider ____________costs.
A) ordering and carrying
B) purchase
C) purchase and ordering
D) purchase, order, and carrying

Accepted Answer

The answer of The buyer must decide whether to accept...

Question 8

Since the total cost is relatively ____________ around the EOQ, it is ____________ to have exact values.
A) sloped, critical
B) flat, critical
C) flat, not critical
D) sloped, not critical

Accepted Answer

The total cost curve is relatively flat around the Economic Order Quantity (EOQ), making it not critical to have exact values.

Question 9

Demand is not uniform and stock must be built ahead. It is better to plan a buildup of____________ inventory based on capacity and future demand.
A) WIP
B) transportation
C) multiples of
D) anticipation

Accepted Answer

Anticipation inventory is built up in advance of expected demand increases, allowing companies to meet future demand without disruptions.

Question 10

Inventory management personnel must establish decision rules so top management will know when to order and how much.

Accepted Answer

The answer of Inventory management personnel must establish decision rules...

Question 11

An item has an annual demand of $5,000, preparation costs of $20 per order, and a carrying cost of 20%. What is the EOQ in dollars?

Accepted Answer

The answer of An item has an annual demand of...

Question 12

The ____________curve is flat at the bottom.
A) ordering cost
B) total cost
C) holding cost
D) carrying cost

Accepted Answer

The answer of The ____________curve is flat at the bottom.
A)...

Question 13

Discuss the characteristics or assumptions of the non instantaneous receipt model.

Accepted Answer

The answer of Discuss the characteristics or assumptions of the...

Question 14

If demand is lumpy and replenishment occurs over time, EOQ will produce the best results.

Accepted Answer

EOQ assumes constant demand and immediate replenishment, so it may not be optimal for lumpy demand patterns.

Question 15

It is usually east to determine accurately the cost of carrying inventory and the cost of ordering.

Accepted Answer

Determining the cost of carrying inventory and the cost of ordering involves various factors and assumptions, making it complex and often requiring estimation.

Question 16

Discuss the purpose of transportation inventory and why is is a consideration when calculating EOQ?

Accepted Answer

The answer of Discuss the purpose of transportation inventory and...

Question 17

An item has an annual demand of 25,000 units, a unit cost of $10, an order preparation cost of $10, and a carrying cost of 20%. It is ordered on the basis of an economic order quantity, but the supplier has offered a 2% discount on orders of $10,000 or more. Should the supplier's offer be accepted?

Accepted Answer

The answer of An item has an annual demand of...

Question 18

The annual demand is 10,000 units, the ordering cost if $30 per order, the carrying cost is 20% and the unit cost if $15. The order quantity is 600 units. Calculate the a. annual ordering cost, b. the annual carrying cost, and c. the total annual cost.

Accepted Answer

The answer of The annual demand is 10,000 units, the...

Question 19

____________depend on the quantity ordered.
A) The cost of carrying inventory
B) The cost of ordering inventory
C) Both A and B
D) Neither A nor B

Accepted Answer

Both the cost of carrying inventory and the cost of ordering inventory depend on the quantity ordered. Carrying costs increase with larger quantities due to storage, insurance, and obsolescence, while ordering costs may decrease with larger quantities due to economies of scale.

Question 20

The objectives of inventory management are to provide the required level of customer service and to reduce the sum of all costs involved. What questions must be answered to achieve these objectives?

Accepted Answer

The answer of The objectives of inventory management are to...

Quiz 10: Order Quantities

Discuss the assumptions of the EOQ model.

A variation on the fixed- order quantity system is the mix- max system where an order is placed with the quantity available rises above the order point.

If the order point is 100 units, the maximum is 300 units, and the quantity actually available when the order is placed is 75, what is the order quantity?

There is an order quantity in which the sum of the ____________ is a minimum.

The cost of placing a manufacturing order is made up from____________ .

The annual demand for a SKU is 10,075 units and it is ordered in quantities of 650 units. Calculate the average inventory and the number of orders placed per year.

The buyer must decide whether to accept a quantity discount and must consider ____________costs.

Since the total cost is relatively around the EOQ, it is to have exact values.

Demand is not uniform and stock must be built ahead. It is better to plan a buildup of____________ inventory based on capacity and future demand.