GMS 401 EXAMS SET 2025/2026 QUESTIONS WITH
ANSWERS RATED A+
✔✔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
a. $1.50
b. $2.00
c. $3.00
d. $150.00
e. not enough data to determine - ✔✔c. $3.00
✔✔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.
a. $400
b. $800
c. $1200
d. zero; this is a class C item
e. cannot be determined because unit price is not known - ✔✔b. $800
✔✔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
a. all 4000 units at one time
b. 200 units per order
c. every 20 days
d. 10 times per year
e. none of the above - ✔✔b. 200 units per order
✔✔Which of the following statements regarding the reorder point is true?
a. The reorder point is that quantity that triggers an action to restock an item.
b. There is a reorder point even if lead time and demand during lead time are constant.
c. The reorder point is larger than d x L if safety stock is present.
d. The fixed-period model has no reorder point.
e. All of the above are true. - ✔✔e. All of the above are true.
✔✔The EOQ model with quantity discounts attempts to determine
a. what is the lowest amount of inventory necessary to satisfy a certain service level
b. what is the lowest purchasing price
c. whether to use fixed-quantity or fixed-period order policy
,d. how many units should be ordered
e. what is the shortest lead time - ✔✔d. how many units should be ordered
✔✔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?
a. One hundred is the reorder point, and 14 is the order quantity.
b. Fourteen is the reorder point, and 100 is the order quantity.
c. The number 100 is a function of demand during lead time.
d. Fourteen is the safety stock, and 100 is the reorder point.
e. None of the above is true. - ✔✔b. Fourteen is the reorder point, and 100 is the order
quantity.
✔✔Which of the following statements regarding the production order quantity model is
true?
a. It applies only to items produced in the firm's own production departments.
b. It relaxes the assumption that all the order quantity is received at one time.
c. It relaxes the assumption that the demand rate is constant.
d. It minimizes the total production costs.
e. It minimizes inventory. - ✔✔b. It relaxes the assumption that all the order quantity is
received at one time.
✔✔Which of these statements about the production order quantity model is false?
a. The production order quantity model is appropriate when the assumptions of the
basic EOQ
model are met, except that receipt is noninstantaneous.
b. Because receipt is noninstantaneous, some units are used immediately, not stored in
inventory.
c. Average inventory is less than one-half of the production order quantity.
d. All else equal, the smaller the ratio of demand rate to production rate, the larger is
the
production order quantity.
e. None of the above is false. - ✔✔d. All else equal, the smaller the ratio of demand
rate to production rate, the larger is the
production order quantity.
✔✔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
a. 139
b. 174
, c. 184
d. 365
e. 548 - ✔✔c. 184
✔✔A production order quantity problem has daily demand rate = 10 and daily
production rate = 50.
The production order quantity for this problem is approximately 612 units. The average
inventory
for this problem is approximately
a. 61
b. 245
c. 300
d. 306
e. 490 - ✔✔b. 245
✔✔Which category of inventory holding costs is much higher than average for rapid-
change industries
such as PCs and cell phones?
a. housing costs
b. material handling costs
c. labor cost
d. parts cost
e. pilferage, scrap, and obsolescence - ✔✔e. pilferage, scrap, and obsolescence
✔✔When quantity discounts are allowed, the cost-minimizing order quantity
a. is always an EOQ quantity
b. minimizes the sum of holding and ordering costs
c. minimizes the unit purchase price
d. may be a quantity below that at which one qualifies for that price
e. minimizes the sum of holding, ordering, and product costs - ✔✔e. minimizes the sum
of holding, ordering, and product costs
✔✔Which of the following statements about quantity discounts is false?
a. The cost-minimizing solution may or may not be where annual holding costs equal
annual
ordering costs.
b. In inventory management, item cost becomes relevant to inventory decisions only
when a
quantity discount is available.
c. If carrying costs are expressed as a percentage of value, EOQ is larger at each
lower price in
the discount schedule.
d. The larger annual demand, the less attractive a discount schedule will be.
e. The smaller the ordering cost, the less attractive a discount schedule will be. - ✔✔d.
The larger annual demand, the less attractive a discount schedule will be.
ANSWERS RATED A+
✔✔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
a. $1.50
b. $2.00
c. $3.00
d. $150.00
e. not enough data to determine - ✔✔c. $3.00
✔✔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.
a. $400
b. $800
c. $1200
d. zero; this is a class C item
e. cannot be determined because unit price is not known - ✔✔b. $800
✔✔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
a. all 4000 units at one time
b. 200 units per order
c. every 20 days
d. 10 times per year
e. none of the above - ✔✔b. 200 units per order
✔✔Which of the following statements regarding the reorder point is true?
a. The reorder point is that quantity that triggers an action to restock an item.
b. There is a reorder point even if lead time and demand during lead time are constant.
c. The reorder point is larger than d x L if safety stock is present.
d. The fixed-period model has no reorder point.
e. All of the above are true. - ✔✔e. All of the above are true.
✔✔The EOQ model with quantity discounts attempts to determine
a. what is the lowest amount of inventory necessary to satisfy a certain service level
b. what is the lowest purchasing price
c. whether to use fixed-quantity or fixed-period order policy
,d. how many units should be ordered
e. what is the shortest lead time - ✔✔d. how many units should be ordered
✔✔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?
a. One hundred is the reorder point, and 14 is the order quantity.
b. Fourteen is the reorder point, and 100 is the order quantity.
c. The number 100 is a function of demand during lead time.
d. Fourteen is the safety stock, and 100 is the reorder point.
e. None of the above is true. - ✔✔b. Fourteen is the reorder point, and 100 is the order
quantity.
✔✔Which of the following statements regarding the production order quantity model is
true?
a. It applies only to items produced in the firm's own production departments.
b. It relaxes the assumption that all the order quantity is received at one time.
c. It relaxes the assumption that the demand rate is constant.
d. It minimizes the total production costs.
e. It minimizes inventory. - ✔✔b. It relaxes the assumption that all the order quantity is
received at one time.
✔✔Which of these statements about the production order quantity model is false?
a. The production order quantity model is appropriate when the assumptions of the
basic EOQ
model are met, except that receipt is noninstantaneous.
b. Because receipt is noninstantaneous, some units are used immediately, not stored in
inventory.
c. Average inventory is less than one-half of the production order quantity.
d. All else equal, the smaller the ratio of demand rate to production rate, the larger is
the
production order quantity.
e. None of the above is false. - ✔✔d. All else equal, the smaller the ratio of demand
rate to production rate, the larger is the
production order quantity.
✔✔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
a. 139
b. 174
, c. 184
d. 365
e. 548 - ✔✔c. 184
✔✔A production order quantity problem has daily demand rate = 10 and daily
production rate = 50.
The production order quantity for this problem is approximately 612 units. The average
inventory
for this problem is approximately
a. 61
b. 245
c. 300
d. 306
e. 490 - ✔✔b. 245
✔✔Which category of inventory holding costs is much higher than average for rapid-
change industries
such as PCs and cell phones?
a. housing costs
b. material handling costs
c. labor cost
d. parts cost
e. pilferage, scrap, and obsolescence - ✔✔e. pilferage, scrap, and obsolescence
✔✔When quantity discounts are allowed, the cost-minimizing order quantity
a. is always an EOQ quantity
b. minimizes the sum of holding and ordering costs
c. minimizes the unit purchase price
d. may be a quantity below that at which one qualifies for that price
e. minimizes the sum of holding, ordering, and product costs - ✔✔e. minimizes the sum
of holding, ordering, and product costs
✔✔Which of the following statements about quantity discounts is false?
a. The cost-minimizing solution may or may not be where annual holding costs equal
annual
ordering costs.
b. In inventory management, item cost becomes relevant to inventory decisions only
when a
quantity discount is available.
c. If carrying costs are expressed as a percentage of value, EOQ is larger at each
lower price in
the discount schedule.
d. The larger annual demand, the less attractive a discount schedule will be.
e. The smaller the ordering cost, the less attractive a discount schedule will be. - ✔✔d.
The larger annual demand, the less attractive a discount schedule will be.
