Inventory Management Multiple Choice Questions and Answers

11. 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

12. 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.

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

1. true.
2. false.

14. 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

15. 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

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

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

17. The cost of insurance and taxes are included in

1. Cost of ordering
2. Set up cost
3. Inventory carrying cost
4. Cost of shortages

18. The cost of insurance and taxes are included in

1. Cost of ordering
2. Set up cost
3. Inventory carrying cost
4. Cost of shortages

19. The economic order quantity cannot be used when holding costs are a percentage of purchase cost.

1. true.
2. false.

20. The following classes of costs are usually involved in inventory decisions except

1. Cost of ordering
2. Carrying cost
3. Cost of shortages
4. Machining cost