ISOM 351 COMPLETE STUDY SHEET
QUESTIONS AND CORRECT ANSWERS
PREMIUM PREPARATION MATERIAL
●● Shipments of Product A from a distribution center to a retailer are
made in lots of 350. The retailer's average demand for A is 75 units per
week. Lead time from distributor to retailer is 3 weeks. The retailer pays
for the shipments when they leave the distributor. The distributor has
agreed to reduce the lead time to 2 weeks if the retailer will purchase
quantities of 400 per shipment instead of 350.
Refer to the instruction above. With the change in lead times, the
pipeline inventory will:
Answer: decrease by 75 units.
●● Shipments of Product X from a plant to a wholesaler are made in lots
of 600. The wholesaler's average demand for X is 100 units per week.
Lead time from plant to wholesaler is 4 weeks. The wholesaler pays for
the shipments when they leave the plant.
Refer to the instruction above. What is the total of the wholesaler's
current cycle plus pipeline inventories?
Answer: 700 units
,●● What is generally true about the class B SKUs in ABC analysis?
They represent about:
Answer: 30 percent of all SKUs and about 15 percent of the dollar
usage.
●● Which one of the following statements regarding the economic order
quality (EOQ) is true?
-The EOQ model combines several different item orders to the same
supplier.
-If an order quality is larger than the EOQ, the annual holding cost for
cycle inventory exceeds the annual ordering cost.
-The EOQ model assumes a variable demand pattern.
-When the interest rate drops, the inventory holding cost decreases and
the EOQ decreases.
Answer: If an order quality is larger than the EOQ, the annual holding
cost for cycle inventory exceeds the annual ordering cost.
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
the cost of place an order of $50, and the holding cost for each assembly
is $20 per year. The company operates 250 days per year.
Use the information. What is the economic order quality for the XO-01?
, Answer: greater than 180 units but less than or equal to 250 units
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
the cost of place an order of $50, and the holding cost for each assembly
is $20 per year. The company operates 250 days per year.
Use the information. What are the annual inventory holding costs if
Talbot orders using the EOQ quantity?
Answer: greater than $1,500 but less than or equal to $4,000
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
the cost of place an order of $50, and the holding cost for each assembly
is $20 per year. The company operates 250 days per year.
Use the information. What are the annual ordering costs if Talbot orders
using the EOQ quantity?
Answer: greater than $1,000 but less than or equal to $2,500
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
QUESTIONS AND CORRECT ANSWERS
PREMIUM PREPARATION MATERIAL
●● Shipments of Product A from a distribution center to a retailer are
made in lots of 350. The retailer's average demand for A is 75 units per
week. Lead time from distributor to retailer is 3 weeks. The retailer pays
for the shipments when they leave the distributor. The distributor has
agreed to reduce the lead time to 2 weeks if the retailer will purchase
quantities of 400 per shipment instead of 350.
Refer to the instruction above. With the change in lead times, the
pipeline inventory will:
Answer: decrease by 75 units.
●● Shipments of Product X from a plant to a wholesaler are made in lots
of 600. The wholesaler's average demand for X is 100 units per week.
Lead time from plant to wholesaler is 4 weeks. The wholesaler pays for
the shipments when they leave the plant.
Refer to the instruction above. What is the total of the wholesaler's
current cycle plus pipeline inventories?
Answer: 700 units
,●● What is generally true about the class B SKUs in ABC analysis?
They represent about:
Answer: 30 percent of all SKUs and about 15 percent of the dollar
usage.
●● Which one of the following statements regarding the economic order
quality (EOQ) is true?
-The EOQ model combines several different item orders to the same
supplier.
-If an order quality is larger than the EOQ, the annual holding cost for
cycle inventory exceeds the annual ordering cost.
-The EOQ model assumes a variable demand pattern.
-When the interest rate drops, the inventory holding cost decreases and
the EOQ decreases.
Answer: If an order quality is larger than the EOQ, the annual holding
cost for cycle inventory exceeds the annual ordering cost.
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
the cost of place an order of $50, and the holding cost for each assembly
is $20 per year. The company operates 250 days per year.
Use the information. What is the economic order quality for the XO-01?
, Answer: greater than 180 units but less than or equal to 250 units
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
the cost of place an order of $50, and the holding cost for each assembly
is $20 per year. The company operates 250 days per year.
Use the information. What are the annual inventory holding costs if
Talbot orders using the EOQ quantity?
Answer: greater than $1,500 but less than or equal to $4,000
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
the cost of place an order of $50, and the holding cost for each assembly
is $20 per year. The company operates 250 days per year.
Use the information. What are the annual ordering costs if Talbot orders
using the EOQ quantity?
Answer: greater than $1,000 but less than or equal to $2,500
●● The Talbot Company uses electrical assemblies to produce an array
of small appliances. One of its high cost/high volume assemblies, the
XO-01, has an estimated annual demand of 8,000 units. Talbot estimates
