Question: Relative to holding costs (Ch), which of the following is an effective and efficient stock control decision?
Answer Options: Ordering in small amounts to keep holding costs at a bare minimum Ordering in large amounts so that the annual cost of holding stock lowers the ordering cost Negotiating warehouse space on an ongoing basis to accommodate stock fluctuations Monitoring stock so that a new order arrives on the day the last item is sold
Answer: Monitoring stock so that a new order arrives on the day the last item is sold
Question: What is another common name for the Pareto classification of stock items?
Answer Options: Materials requirements planning (MRP) ABC classification of stock items (ABC analysis) Just-in-time (JIT) management Economic order quantity (EOQ) analysis
Answer: ABC classification of stock items (ABC analysis)
Question: Which of the following decisions best describes an organization’s stock control problem?
Answer Options: Whether to maintain stock of an item with low sales volume Whether to buy back common stock to increase the organization’s equity ratio How much to order in each time period to meet product demand How to determine a safety stock level
Answer: How much to order in each time period to meet product demand
Question: Which of the following stock control costs occurs whenever a stock directive is generated?
Answer Options: Stockout Holding Order Purchase
Answer: Order
Question: Which of the following stock control costs represents the actual cost of acquiring a stock item from a supplier?
Answer Options: Stockout Holding Order Purchase
Answer: Purchase
Question: Which of the following is an assumption of the economic order quantity (EOQ)?
Answer Options: Demand is constant over time. Demand is unknown. Costs are variable. Order quantity varies over time.
Answer: Demand is constant over time.
Question: According to the economic order quantity (EOQ) model for stock control, how is the number of orders (N) within a cycle calculated?
Answer Options: N = Demand / EOQ N = Total Cost / EOQ N = EOQ / Quantity N = Quantity / EOQ
Answer: N = Demand / EOQ
Question: Assume an annual demand (D) for an item is 100. The cost of placing an order (Co) is $50. What is the annual cost if the organization orders a quantity (Q) of 10?
Answer Options: $250 $500 $1,050 $1,500
Answer: $1,050
Question: Assume that demand (D) is 5,000, ordering costs (Co) are $125, and holding costs (Ch) are $20. Based on the classical model for stock control, what would the optimal ordering amount in units be?
Answer Options: 100 250 1,075 5,000
Answer: 250
Question: Assume that demand (D) is 500, ordering costs (Co) are $15, holding costs (Ch) are $20, and unit price (P) is $250. Based on the EOQ model for stock control, what would the economic order quantity be?
Answer Options: 17.31 18.34 27.39 40.82
Answer: 27.39
Question: A floral shop sells 500 stems daily, and its supplier takes three days to deliver the next order of flowers. What stem level should the manager maintain to avoid a stock-out?
Answer Options: 300 1,000 1,500 3,500
Answer: 1,500
Question: Assume that the EOQ is 40 and the annual quantity (Q) is 250. What is the reorder cycle?
Answer Options: 22.3 days 40 days 58.4 days 123 days
Answer: 58.4 days
Question: What is the primary purpose of material requirements planning (MRP)?
Answer Options: To provide manufacturing data relative to purchasing and shipping schedules of parts and components To improve the accuracy and detail of time schedules for parts and services To develop an assembly line estimate of lead time To calculate an EOQ relative to manufactured goods
Answer: To provide manufacturing data relative to purchasing and shipping schedules of parts and components
Question: Which of the following statements best applies to the primary goal of a just-in-time (JIT) stock control system?
Answer Options: Zero stock levels are achieved across the supply chain. Inventory items are ordered at the point of sale. Manufacturing gets completed just-in-time for shipment. The need for total quality management no longer exists.
Answer: Zero stock levels are achieved across the supply chain.
Question: What general rule is applied in the Pareto classification of stock items?
Answer Options: 20/80 rule, where 80% of the items may contribute 20% of the profit 40/60 rule, where 40% of the items may contribute 60% of the profit 50/50 rule, where 50% of the items may contribute 50% of the profit or vice versa 80/20 rule, where 20% of the items may contribute 80% of the profit
Answer: 80/20 rule, where 20% of the items may contribute 80% of the profit