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1 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The two basic questions in inventory management are how much to order and when to order. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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2 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Using the EOQ model, if an item's holding cost increases, its order quantity will decrease. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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3 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Use of the fixed-interval model requires having a perpetual inventory system. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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4 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) With the A-B-C approach, items which have high unit costs are classified as A items. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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5 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) When using EOQ ordering, the order quantity must be computed in every order cycle. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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6 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Inventory might be held to take advantage of order cycles. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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7 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The economic order quantity cannot be used when holding costs are a percentage of purchase cost. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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8 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Companies that can successfully use the A-B-C approach can avoid using EOQ models. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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9 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) The objective of inventory management is to minimize holding costs. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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10 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Holding and ordering costs are inversely related to each other. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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11 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) A two-bin system is essentially a simple reorder point system. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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12 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) In the basic EOQ model, annual ordering cost and annual ordering cost are equal for the optimal order quantity. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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13 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Increasing the order quantity so that it is slightly above the EOQ would not increase the total cost by very much. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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14 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) A fixed-interval ordering system would be used for items that have independent demand. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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15 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) A store that sells daily newspapers could use the single-period model for reordering. |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | True |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | False |
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16 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Other things beings equal, an increase in lead time for inventory orders will result in an increase in the: |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | order size |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | order frequency |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | reorder point |
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17 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If average demand for an item is 21 units per day, safety stock is 4 units, and lead time is 2 days, the ROP will be: |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | 84 |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | 46 |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | 42 |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | none of these |
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18 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) In an A-B-C system, B items typically represent about this percentage of items: |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | 90% |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | 75% |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | 50% |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | 30% |
| ![](/olcweb/styles/shared/spacer.gif) | E)![](/olcweb/styles/shared/spacer.gif) | 15% |
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19 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Which model does not take into account the amount of inventory on hand? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | FOI |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | ROP |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | EOQ |
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20 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Which product is usually bought on an ROP basis? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | textbooks |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | wedding gifts |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | sugar |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | newspaper |
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21 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Which product is usually bought on a fixed interval basis? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | textbooks |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | wedding gifts |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | sugar |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | brownies |
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22 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) In the two-bin system, the quantity in the second bin is equal to the: |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | EOQ |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | ROP |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | FOI |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | None of these. |
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23 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Using the basic EOQ model, if the ordering cost doubles, the order quantity will be |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | double its former value |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | about 50% of its former value |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | about 71% of its former value |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | unaffected |
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24 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) If a decrease in unit price causes the average demand rate to increase, which one of these would not increase? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | the EOQ |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | lead time |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | annual holding cost |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | the ROP |
| ![](/olcweb/styles/shared/spacer.gif) | E)![](/olcweb/styles/shared/spacer.gif) | safety stock |
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25 | ![](/olcweb/styles/shared/spacer.gif) | ![](/olcweb/styles/shared/spacer.gif) Setup costs are analogous to which one of these costs? |
| ![](/olcweb/styles/shared/spacer.gif) | A)![](/olcweb/styles/shared/spacer.gif) | shortage |
| ![](/olcweb/styles/shared/spacer.gif) | B)![](/olcweb/styles/shared/spacer.gif) | holding |
| ![](/olcweb/styles/shared/spacer.gif) | C)![](/olcweb/styles/shared/spacer.gif) | excess |
| ![](/olcweb/styles/shared/spacer.gif) | D)![](/olcweb/styles/shared/spacer.gif) | ordering |
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