BUS5115 Operations Management Units 5-8 Test Bank —
Inventory, Project Management, Lean, and Global Operations
Course:
BUS5115 Operations Management — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Comprehensive Test Bank — 60 Q&A with Verified Answers
BUS5115 Units 5-8 Test Bank
60 Questions with Verified Correct Answers | 100% Complete Solutions
Question 1 — Unit 5:
A manufacturing company uses 10,000 units of a specific component annually. The ordering cost
is $50 per order, and the annual holding cost is $4 per unit. According to the Economic Order
Quantity (EOQ) model, what is the optimal order quantity?
A) 250 units
B) 500 units
C) 1,000 units
D) 1,250 units
Answer: B
Explanation:
The EOQ formula is the square root of ((2 Demand Ordering Cost) / Holding Cost). Here, it is
sqrt((2 10000 50) / 4) = sqrt(1,000,) = sqrt(250,000) = 500 units.
Question 2 — Unit 5:
In ABC inventory classification, which of the following characteristics is most indicative of "A"
items?
,A) They represent 80% of the inventory items but only 20% of the total value.
B) They require minimal record-keeping and loose control.
C) They account for a large percentage of total inventory value (e.g., 70-80%) but a small
percentage of total items (e.g., 10-20%).
D) They are typically bulk materials like nuts and bolts that are ordered frequently.
Answer: C
Explanation:
ABC analysis is based on the Pareto principle. "A" items are high-value but low-volume, meaning
they contribute most to the total inventory value while making up a small fraction of the total
physical items, thus requiring tight control.
Question 3 — Unit 5:
A regional hospital is analyzing its blood supply inventory. Which inventory management model is
most appropriate for determining the optimal stocking levels of a product with a very short shelf
life and uncertain demand?
A) Fixed-Order Quantity Model
B) Periodic Review Model
C) Single-Period Model (Newsboy Problem)
D) Material Requirements Planning (MRP)
Answer: C
Explanation:
The Single-Period Model is used for perishables or items with a limited lifespan (like blood,
newspapers, or seasonal goods) where unused inventory loses its value entirely after the period
ends. It balances the cost of overstocking against the cost of understocking.
Question 4 — Unit 5:
Which of the following factors would most likely lead a firm to increase its safety stock levels?
A) A decrease in demand variability
B) A decrease in the supplier's lead time
C) An increase in the standard deviation of lead time
D) A shift from a 99% service level target to a 90% service level target
Answer: C
, Explanation:
Safety stock acts as a buffer against uncertainty. An increase in the variability (standard deviation)
of the supplier's lead time means deliveries are more unpredictable, requiring higher safety stock
to prevent stockouts and maintain customer service levels.
Question 5 — Unit 5:
What is the primary difference between a Continuous Review (Q) system and a Periodic Review
(P) system?
A) The Q system orders variable quantities at fixed time intervals, while the P system orders fixed
quantities at variable time intervals.
B) The Q system requires constant tracking of inventory levels, while the P system checks
inventory only at specified intervals.
C) The Q system is typically used for "C" items, while the P system is used exclusively for "A"
items.
D) The Q system generally requires larger safety stock levels than the P system.
Answer: B
Explanation:
In a Continuous Review (Q) system, inventory is monitored continuously, and a fixed quantity is
ordered whenever the reorder point is reached. A Periodic Review (P) system only checks
inventory at fixed intervals and orders enough to reach a target level, requiring less constant
monitoring but often more safety stock.
Question 6 — Unit 5:
A consumer electronics retailer experiences highly fluctuating demand due to social media trends.
To combat the "bullwhip effect" within its supply chain, which strategy should management
implement?
A) Increase order batching to achieve economies of scale.
B) Share real-time point-of-sale (POS) data with upstream suppliers.
C) Implement frequent price promotions and discounts.
D) Lengthen the lead time given to suppliers.
Answer: B
Explanation:
The bullwhip effect refers to the amplification of demand variability up the supply chain. Sharing
real-time POS data removes information asymmetry, allowing upstream suppliers to plan based on
Inventory, Project Management, Lean, and Global Operations
Course:
BUS5115 Operations Management — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Comprehensive Test Bank — 60 Q&A with Verified Answers
BUS5115 Units 5-8 Test Bank
60 Questions with Verified Correct Answers | 100% Complete Solutions
Question 1 — Unit 5:
A manufacturing company uses 10,000 units of a specific component annually. The ordering cost
is $50 per order, and the annual holding cost is $4 per unit. According to the Economic Order
Quantity (EOQ) model, what is the optimal order quantity?
A) 250 units
B) 500 units
C) 1,000 units
D) 1,250 units
Answer: B
Explanation:
The EOQ formula is the square root of ((2 Demand Ordering Cost) / Holding Cost). Here, it is
sqrt((2 10000 50) / 4) = sqrt(1,000,) = sqrt(250,000) = 500 units.
Question 2 — Unit 5:
In ABC inventory classification, which of the following characteristics is most indicative of "A"
items?
,A) They represent 80% of the inventory items but only 20% of the total value.
B) They require minimal record-keeping and loose control.
C) They account for a large percentage of total inventory value (e.g., 70-80%) but a small
percentage of total items (e.g., 10-20%).
D) They are typically bulk materials like nuts and bolts that are ordered frequently.
Answer: C
Explanation:
ABC analysis is based on the Pareto principle. "A" items are high-value but low-volume, meaning
they contribute most to the total inventory value while making up a small fraction of the total
physical items, thus requiring tight control.
Question 3 — Unit 5:
A regional hospital is analyzing its blood supply inventory. Which inventory management model is
most appropriate for determining the optimal stocking levels of a product with a very short shelf
life and uncertain demand?
A) Fixed-Order Quantity Model
B) Periodic Review Model
C) Single-Period Model (Newsboy Problem)
D) Material Requirements Planning (MRP)
Answer: C
Explanation:
The Single-Period Model is used for perishables or items with a limited lifespan (like blood,
newspapers, or seasonal goods) where unused inventory loses its value entirely after the period
ends. It balances the cost of overstocking against the cost of understocking.
Question 4 — Unit 5:
Which of the following factors would most likely lead a firm to increase its safety stock levels?
A) A decrease in demand variability
B) A decrease in the supplier's lead time
C) An increase in the standard deviation of lead time
D) A shift from a 99% service level target to a 90% service level target
Answer: C
, Explanation:
Safety stock acts as a buffer against uncertainty. An increase in the variability (standard deviation)
of the supplier's lead time means deliveries are more unpredictable, requiring higher safety stock
to prevent stockouts and maintain customer service levels.
Question 5 — Unit 5:
What is the primary difference between a Continuous Review (Q) system and a Periodic Review
(P) system?
A) The Q system orders variable quantities at fixed time intervals, while the P system orders fixed
quantities at variable time intervals.
B) The Q system requires constant tracking of inventory levels, while the P system checks
inventory only at specified intervals.
C) The Q system is typically used for "C" items, while the P system is used exclusively for "A"
items.
D) The Q system generally requires larger safety stock levels than the P system.
Answer: B
Explanation:
In a Continuous Review (Q) system, inventory is monitored continuously, and a fixed quantity is
ordered whenever the reorder point is reached. A Periodic Review (P) system only checks
inventory at fixed intervals and orders enough to reach a target level, requiring less constant
monitoring but often more safety stock.
Question 6 — Unit 5:
A consumer electronics retailer experiences highly fluctuating demand due to social media trends.
To combat the "bullwhip effect" within its supply chain, which strategy should management
implement?
A) Increase order batching to achieve economies of scale.
B) Share real-time point-of-sale (POS) data with upstream suppliers.
C) Implement frequent price promotions and discounts.
D) Lengthen the lead time given to suppliers.
Answer: B
Explanation:
The bullwhip effect refers to the amplification of demand variability up the supply chain. Sharing
real-time POS data removes information asymmetry, allowing upstream suppliers to plan based on
