1
,Appendix III cx
1) The EOQ model is a mathematical tool for determining the order quantity that:
cx cx cx cx cx cx cx cx cx cx cx cx
A) maximizes the costs of ordering and holding inventory. cx cx cx cx cx cx cx
B) equals the costs of ordering and holding inventory.
cx cx cx cx cx cx cx
C) minimizes the costs of ordering and holding inventory. cx cx cx cx cx cx cx
All Chapterscx
D) has no effect on the costs of ordering and holding inventory.
cx cx cx cx cx cx cx cx cx cx
E) none of these answers are correct.
Answers Included
cx cx cx cx cx
cx
2) Inventory decisions involve a delicate balance between which of the following classes of
cx cx cx cx cx cx cx cx cx cx cx cx cx
costs?
A) Ordering costs, advertising costs, and shipping costs
cx cx cx cx cx cx
B) Advertising costs, holding costs, and shortage costs cx cx cx cx cx cx
C) Ordering costs, holding costs, and shortage costs
cx cx cx cx cx cx
D) Ordering costs, shipping costs, and shortage costs
cx cx cx cx cx cx
E) Shipping costs, holding costs, and shortage costs
cx cx cx cx cx cx
3) Which one of the following is true of a just-in-time (JIT) system?
cx cx cx cx cx cx cx cx cx cx cx
A) JIT system uses a “pull” approach to controlling manufacturing
cx cx cx cx cx cx cx cx
B) Inventory of raw materials and parts are kept as a buffercx cx cx cx cx cx cx cx cx cx
C) Inventory of partially completed parts are kept as a buffer
cx cx cx cx cx cx cx cx cx
D) Finished goods are kept as a buffer cx cx cx cx cx cx
E) None of the answers are correctcx cx cx cx cx
4) Which one of the following is true of Economic Order Quantity (EOQ)?
cx cx cx cx cx cx cx cx cx cx cx
A) The EOQ approach takes the view that some inventory is necessary in order to
cx cx cx cx cx cx cx cx cx cx cx cx cx cx
optimize the order quantity cx cx cx
B) Is calculates as the square root of the following: (2 × annual requirement × cost per
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
order) ÷ annual holding cost per unit
cx cx cx cx cx cx
C) The graphical approach is one method of calculating EOQ
cx cx cx cx cx cx cx cx
D) A mathematical tool for determining the order quantity that minimizes the cost of
cx cx cx cx cx cx cx cx cx cx cx cx cx
ordering and holding inventory cx cx cx
E) All of the answers are correct
cx cx cx cx cx
2
,5) Which of the following is a way that JIT efficiencies are achieved?
cx cx cx cx cx cx cx cx cx cx cx
A) Negotiating long-term supply agreements cx cx cx
B) Eliminating inspections cx
C) Reducing the number of vendors cx cx cx cx
D) Making less frequent payments cx cx cx
E) All of the answers are correct
cx cx cx cx cx
6) Inventory holding costs typically include:
cx cx cx cx
A) clerical costs of purchase-order preparation.
cx cx cx cx
B) costs of deterioration, theft, or spoilage.
cx cx cx cx cx
C) costs associated with lost sales to customers.
cx cx cx cx cx cx
D) forgone interest on money tied up in inventory.
cx cx cx cx cx cx cx
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in i
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
nventory.
7) Inventory holding costs would typically include all of the following except:
cx cx cx cx cx cx cx cx cx cx
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. cx
8) Which of the following is classified as an inventory shortage cost?
cx cx cx cx cx cx cx cx cx cx
A) Purchase order preparation cx cx
B) Production disruption cx
C) Lost sales and lost customers
cx cx cx cx
D) Spoilage
E) Both production disruption and lost sales and lost customers
cx cx cx cx cx cx cx cx
9) At the economic order quantity:
cx cx cx cx
A) total annual inventory costs, holding costs, and ordering costs are all minimized.
cx cx cx cx cx cx cx cx cx cx cx
B) total annual inventory costs and holding costs are minimized.
cx cx cx cx cx cx cx cx
C) total annual inventory costs are minimized, and holding costs equal ordering costs.
cx cx cx cx cx cx cx cx cx cx cx
D) total annual inventory costs are minimized, and holding costs exceed ordering costs.
cx cx cx cx cx cx cx cx cx cx cx
E) total annual inventory costs are minimized, and ordering costs exceed holding costs.
cx cx cx cx cx cx cx cx cx cx cx
3
, 10) Langdon Enterprises uses an economic order quantity model and has determined an optimal
cx cx cx cx cx cx cx cx cx cx cx cx cx
order size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order, a
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
nd holding costs are $6 per unit. The company's annual holding costs total:
cx cx cx cx cx cx cx cx cx cx cx cx
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. cx cx cx cx cx
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal
cx cx cx cx cx cx cx cx cx cx cx cx cx
order size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
holding costs are $4 per unit. The company's annual holding costs total:
cx cx cx cx cx cx cx cx cx cx cx
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. cx cx cx cx cx
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased i
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
n 310-
cx
sheet packages at a cost of $310 per package. Management estimates that the cost of placing
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx c
and receiving a typical order is $36, and the annual cost of carrying a package in inventory i
x cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
s $3.60. Reflection Graphics uses 4,700 packages of paper each year. Production is constant,
cx cx cx cx cx cx cx cx cx cx cx cx cx
and the lead time to receive an order is two week.
cx cx cx cx cx cx cx cx cx cx cx
The economic order quantity is approximately:
cx cx cx cx cx
Note: Round your final answer to the nearest whole number.
cx cx cx cx cx cx cx cx cx
A) 307 packages. cx
B) 4,018 packages. cx
C) 2,093 packages. cx
D) 1,636 packages. cx
E) 1,166 packages. cx
4
,Appendix III cx
1) The EOQ model is a mathematical tool for determining the order quantity that:
cx cx cx cx cx cx cx cx cx cx cx cx
A) maximizes the costs of ordering and holding inventory. cx cx cx cx cx cx cx
B) equals the costs of ordering and holding inventory.
cx cx cx cx cx cx cx
C) minimizes the costs of ordering and holding inventory. cx cx cx cx cx cx cx
All Chapterscx
D) has no effect on the costs of ordering and holding inventory.
cx cx cx cx cx cx cx cx cx cx
E) none of these answers are correct.
Answers Included
cx cx cx cx cx
cx
2) Inventory decisions involve a delicate balance between which of the following classes of
cx cx cx cx cx cx cx cx cx cx cx cx cx
costs?
A) Ordering costs, advertising costs, and shipping costs
cx cx cx cx cx cx
B) Advertising costs, holding costs, and shortage costs cx cx cx cx cx cx
C) Ordering costs, holding costs, and shortage costs
cx cx cx cx cx cx
D) Ordering costs, shipping costs, and shortage costs
cx cx cx cx cx cx
E) Shipping costs, holding costs, and shortage costs
cx cx cx cx cx cx
3) Which one of the following is true of a just-in-time (JIT) system?
cx cx cx cx cx cx cx cx cx cx cx
A) JIT system uses a “pull” approach to controlling manufacturing
cx cx cx cx cx cx cx cx
B) Inventory of raw materials and parts are kept as a buffercx cx cx cx cx cx cx cx cx cx
C) Inventory of partially completed parts are kept as a buffer
cx cx cx cx cx cx cx cx cx
D) Finished goods are kept as a buffer cx cx cx cx cx cx
E) None of the answers are correctcx cx cx cx cx
4) Which one of the following is true of Economic Order Quantity (EOQ)?
cx cx cx cx cx cx cx cx cx cx cx
A) The EOQ approach takes the view that some inventory is necessary in order to
cx cx cx cx cx cx cx cx cx cx cx cx cx cx
optimize the order quantity cx cx cx
B) Is calculates as the square root of the following: (2 × annual requirement × cost per
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
order) ÷ annual holding cost per unit
cx cx cx cx cx cx
C) The graphical approach is one method of calculating EOQ
cx cx cx cx cx cx cx cx
D) A mathematical tool for determining the order quantity that minimizes the cost of
cx cx cx cx cx cx cx cx cx cx cx cx cx
ordering and holding inventory cx cx cx
E) All of the answers are correct
cx cx cx cx cx
2
,5) Which of the following is a way that JIT efficiencies are achieved?
cx cx cx cx cx cx cx cx cx cx cx
A) Negotiating long-term supply agreements cx cx cx
B) Eliminating inspections cx
C) Reducing the number of vendors cx cx cx cx
D) Making less frequent payments cx cx cx
E) All of the answers are correct
cx cx cx cx cx
6) Inventory holding costs typically include:
cx cx cx cx
A) clerical costs of purchase-order preparation.
cx cx cx cx
B) costs of deterioration, theft, or spoilage.
cx cx cx cx cx
C) costs associated with lost sales to customers.
cx cx cx cx cx cx
D) forgone interest on money tied up in inventory.
cx cx cx cx cx cx cx
E) both costs of deterioration, theft, or spoilage and forgone interest on money tied up in i
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
nventory.
7) Inventory holding costs would typically include all of the following except:
cx cx cx cx cx cx cx cx cx cx
A) insurance.
B) theft.
C) transportation.
D) obsolescence.
E) warehouse rent. cx
8) Which of the following is classified as an inventory shortage cost?
cx cx cx cx cx cx cx cx cx cx
A) Purchase order preparation cx cx
B) Production disruption cx
C) Lost sales and lost customers
cx cx cx cx
D) Spoilage
E) Both production disruption and lost sales and lost customers
cx cx cx cx cx cx cx cx
9) At the economic order quantity:
cx cx cx cx
A) total annual inventory costs, holding costs, and ordering costs are all minimized.
cx cx cx cx cx cx cx cx cx cx cx
B) total annual inventory costs and holding costs are minimized.
cx cx cx cx cx cx cx cx
C) total annual inventory costs are minimized, and holding costs equal ordering costs.
cx cx cx cx cx cx cx cx cx cx cx
D) total annual inventory costs are minimized, and holding costs exceed ordering costs.
cx cx cx cx cx cx cx cx cx cx cx
E) total annual inventory costs are minimized, and ordering costs exceed holding costs.
cx cx cx cx cx cx cx cx cx cx cx
3
, 10) Langdon Enterprises uses an economic order quantity model and has determined an optimal
cx cx cx cx cx cx cx cx cx cx cx cx cx
order size of 2,200 units. Annual demand is 44,000 units, ordering costs are $60 per order, a
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
nd holding costs are $6 per unit. The company's annual holding costs total:
cx cx cx cx cx cx cx cx cx cx cx cx
A) $13,200.
B) $14,400.
C) $485,200.
D) $265,200.
E) none of the answers is correct. cx cx cx cx cx
11) Langdon Enterprises uses an economic order quantity model and has determined an optimal
cx cx cx cx cx cx cx cx cx cx cx cx cx
order size of 500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
holding costs are $4 per unit. The company's annual holding costs total:
cx cx cx cx cx cx cx cx cx cx cx
A) $2,000.
B) $3,000.
C) $21,000.
D) $41,000.
E) none of the answers is correct. cx cx cx cx cx
12) Reflection Graphics uses a special purpose paper on 80% of its jobs. The paper is purchased i
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
n 310-
cx
sheet packages at a cost of $310 per package. Management estimates that the cost of placing
cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx c
and receiving a typical order is $36, and the annual cost of carrying a package in inventory i
x cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx cx
s $3.60. Reflection Graphics uses 4,700 packages of paper each year. Production is constant,
cx cx cx cx cx cx cx cx cx cx cx cx cx
and the lead time to receive an order is two week.
cx cx cx cx cx cx cx cx cx cx cx
The economic order quantity is approximately:
cx cx cx cx cx
Note: Round your final answer to the nearest whole number.
cx cx cx cx cx cx cx cx cx
A) 307 packages. cx
B) 4,018 packages. cx
C) 2,093 packages. cx
D) 1,636 packages. cx
E) 1,166 packages. cx
4
