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ISDS 3115 CH 12 Questions with Detailed Verified
Answers
Which of the following statements about ABC analysis is FALSE?
A. ABC analysis is based on the presumption that controlling the few most important items
produces the vast majority of inventory savings.
B. In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items.
C. In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C" items
have.
D. ABC analysis is based on the presumption that all items must be tightly controlled to produce
important cost savings.
E. Criteria other than annual dollar volume, such as high holding cost or delivery problems, can
determine item classification in ABC analysis. Ans: ✓ ✓ ✓ D
Which of the following is an element of inventory holding costs?
A. material handling costs
B. housing costs
C. pilferage, scrap, and obsolescence
D. investment costs
E. All of the above are elements of inventory holding costs. Ans: ✓ ✓ ✓ E
Which of the following statements about the basic EOQ model is TRUE?
A. If annual demand were to double, the number of orders per year would increase.
B. If the carrying cost were to increase, the EOQ would fall.
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C. If the ordering cost were to double, the EOQ would rise.
D. If annual demand were to double, the EOQ would increase.
E. All of the above statements are true. Ans: ✓ ✓ ✓ E
Which of the following statements regarding the production order quantity model is TRUE?
A. It minimizes the total production costs.
B. It relaxes the assumption that all the order quantity is received at one time.
C. It minimizes inventory.
D. It relaxes the assumption that the demand rate is constant.
E. It applies only to items produced in the firm's own production departments. Ans: ✓ ✓ ✓ B
Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day,
and the order lead time is four days. The service level is 95%. What should the reorder point be?
A. about 38
B. more than 40
C. about 32
D. about 18
E. about 24 Ans: ✓ ✓ ✓ B
An advantage of the fixed-period inventory system is that:
A. no inventory records are required.
B. the average inventory level is reduced.
C. safety stock will be lower than it would be under a fixed-quantity inventory system.
D. orders usually are for smaller order quantities.
E. there is no physical count of inventory items when an item is withdrawn. Ans: ✓ ✓ ✓ E
Which of the following would NOT generally be a motive for a firm to hold inventories?
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ISDS 3115 CH 12 Questions with Detailed Verified
Answers
Which of the following statements about ABC analysis is FALSE?
A. ABC analysis is based on the presumption that controlling the few most important items
produces the vast majority of inventory savings.
B. In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items.
C. In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C" items
have.
D. ABC analysis is based on the presumption that all items must be tightly controlled to produce
important cost savings.
E. Criteria other than annual dollar volume, such as high holding cost or delivery problems, can
determine item classification in ABC analysis. Ans: ✓ ✓ ✓ D
Which of the following is an element of inventory holding costs?
A. material handling costs
B. housing costs
C. pilferage, scrap, and obsolescence
D. investment costs
E. All of the above are elements of inventory holding costs. Ans: ✓ ✓ ✓ E
Which of the following statements about the basic EOQ model is TRUE?
A. If annual demand were to double, the number of orders per year would increase.
B. If the carrying cost were to increase, the EOQ would fall.
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C. If the ordering cost were to double, the EOQ would rise.
D. If annual demand were to double, the EOQ would increase.
E. All of the above statements are true. Ans: ✓ ✓ ✓ E
Which of the following statements regarding the production order quantity model is TRUE?
A. It minimizes the total production costs.
B. It relaxes the assumption that all the order quantity is received at one time.
C. It minimizes inventory.
D. It relaxes the assumption that the demand rate is constant.
E. It applies only to items produced in the firm's own production departments. Ans: ✓ ✓ ✓ B
Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day,
and the order lead time is four days. The service level is 95%. What should the reorder point be?
A. about 38
B. more than 40
C. about 32
D. about 18
E. about 24 Ans: ✓ ✓ ✓ B
An advantage of the fixed-period inventory system is that:
A. no inventory records are required.
B. the average inventory level is reduced.
C. safety stock will be lower than it would be under a fixed-quantity inventory system.
D. orders usually are for smaller order quantities.
E. there is no physical count of inventory items when an item is withdrawn. Ans: ✓ ✓ ✓ E
Which of the following would NOT generally be a motive for a firm to hold inventories?
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