Inventory Management Multiple Choice Questions and Answers

11. If a decrease in unit price causes the average demand rate to increase, which one of these would not increase?

1. the EOQ
2. lead time
3. annual holding cost
4. the ROP

12. 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:

1. 84
2. 46
3. 42
4. none of these

13. In an A-B-C system, B items typically represent about this percentage of items:

1. 90%
2. 75%
3. 50%
4. 30%

14. In the basic EOQ model, annual ordering cost and annual ordering cost are equal for the optimal order quantity.

1. true.
2. false.

15. In the two-bin system, the quantity in the second bin is equal to the:

1. EOQ
2. ROP
3. FOI
4. None of these

16. Increasing the order quantity so that it is slightly above the EOQ would not increase the total cost by very much.

1. true.
2. false.

17. Inventory might be held to take advantage of order cycles.

1. true.
2. false.

18. Other things beings equal, an increase in lead time for inventory orders will result in an increase in the:

1. order size
2. order frequency
3. reorder point

19. Re-ordering level is calculated as

1. Maximum consumption rate x Maximum re-order period
2. Minimum consumption rate x Minimum re-order period
3. Maximum consumption rate x Minimum re-order period
4. Minimum consumption rate x Maximum re-order period

20. Setup costs are analogous to which one of these costs?

1. shortage
2. holding
3. excess
4. ordering