Test 2 - Multiple choice questions

I just want you closeWhere you can stay foreverYou can be sureThat it will only get betterYou and me togetherThrough the days and nightsI don't worry 'causeEverything's gonna be alrightPeople keep talking, they can say what they likeBut all I know is everything's gonna be alright

No one, no one, no oneCan get in the way of what I'm feelingNo one, no one, no oneCan get in the way of what I feel for you, you, youCan get in the way of what I feel for youWhen the rain is pouring downAnd my heart is hurtingYou will always be aroundThis I know for certain

Created by: Lida

Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to
- a.exploit economies of scale and raise cost.
- b.exploit economies of scale and lower cost.
- c.exploit customers and lower cost.
- d.exploit customers and raise cost.
- e.none of the above
The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is
- a.an order.
- b.a job.
- c.a shipment.
- d.a lot or batch.
- e.none of the above
The average inventory in the supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer is
- a.annual inventory.
- b.distribution inventory.
- c.cycle inventory.
- d.physical inventory.
- e.b and c only
A graphical plot depicting the level of inventory over time is
- a.an inventory graph.
- b.a distribution inventory.
- c.an inventory drawing.
- d.an inventory profile.
- e.an inventory picture.
When demand is steady, cycle inventory and lot size are related as
- a.Cycle Inventory = Lot Size x 2.
- b.Cycle Inventory = Q*2.
- c.Cycle Inventory = Q/2.
- d.Cycle Inventory = Lot Size = Q.
- e.none of the above
Average flow time resulting from cycle inventory is equal to
- a.Cycle Inventory/Demand = Q/2.
- b.Cycle Inventory/Demand = Q/2D.
- c.Cycle Inventory = Q/2.
- d.Cycle Inventory = Lot Size = Q.
- e.none of the above
Cycle inventory is primarily held to
- a.take advantage of diseconomies of scale and increase cost within the supply chain.
- b.take advantage of diseconomies of scale and reduce cost within the supply chain.
- c.take advantage of economies of scale and increase cost within the supply chain.
- d.take advantage of economies of scale and reduce cost within the supply chain.
- e.None of the above are true.
Which of the following is not a cost that must be considered in any lot sizing decision?
- a.Average price per unit purchased, $C/unit
- b.Fixed ordering cost incurred per lot, $S/lot
- c.Holding cost incurred per unit per year, $H/unit/year = hC
- d.Manufacturing cost per unit, $M/unit
- e.All of the above are costs to be considered.
The primary role of cycle inventory is to allow different stages in the supply chain to
- a.purchase product in lot sizes that maximize the sum of the material, ordering, and holding cost.
- b.purchase product in lot sizes that minimize the sum of the material, ordering, and holding cost.
- c.sell product in lot sizes that maximize the sum of the material, ordering, and holding cost.
- d.sell product in lot sizes that minimize the sum of the material, ordering, and holding cost.
- e.none of the above
Economies of scale in purchasing and ordering motivate a manager to
- a.increase the lot size and cycle inventory.
- b.decrease the lot size and cycle inventory.
- c.eliminate inventory.
- d.increase the lot size and reduce cycle inventory.
- e.none of the above
Which of the following is not a situation in which any stage of the supply chain exploits economies of scale in its replenishment decisions?
- a.A fixed cost is incurred each time an order is placed or produced.
- b.A holding cost is incurred each period for each unit of inventory.
- c.The supplier offers price discounts based on the quantity purchased per lot.
- d.The supplier offers short-term discounts or holds trade promotions.
- e.all of the above
All costs that do not vary with the size of the order but are incurred each time an order is placed are referred to as
- a.the material cost and is denoted by C.
- b.the fixed ordering cost and is denoted by S.
- c.the holding cost and is denoted by H.
- d.the purchase price and is denoted by P.
- e.none of the above
The price paid per unit is referred to as
- a.the material cost and is denoted by C.
- b.the fixed ordering cost and is denoted by S.
- c.the holding cost and is denoted by H.
- d.the purchase price and is denoted by P.
- e.none of the above
The cost of carrying one unit in inventory for a specified period of time, usually one year, is referred to as
- a.the material cost and is denoted by C.
- b.the fixed ordering cost and is denoted by S.
- c.the holding cost and is denoted by H.
- d.the purchase price and is denoted by P.
- e.none of the above
Which of the following would not be an example of a fixed ordering cost?
- a.administrative cost incurred to place an order
- b.trucking cost incurred to transport an order
- c.labor cost incurred to receive an order
- d.labor cost incurred to manufacture a part
- e.none of the above
Which of the following would not be included in holding cost?
- a.cost of capital
- b.cost of physically storing the inventory
- c.cost of manufacturing
- d.cost that results from the product becoming obsolete
- e.none of the above
The total annual cost is the sum of annual material cost, annual order cost, and annual holding cost, and is given as
- a.TC = CD + (D/Q)S + (Q/2)hC.
- b.TC = CD + (Q/2)S + (D/Q)hC.
- c.TC = CDS + D/Q + (Q/2)hC.
- d.TC = Q/2 + (D/Q)S + (CD)hC.
- e.none of the above
The optimal lot size is referred to as the economic order quantity (EOQ). It is denoted by Q* and is given by the equation
- a.Q* = 2DS/hC.
- b.Q* = 2hC.
- c.Q* = 2DS.
- d.Q* = 2DS/hC.
- e.none of the above
Total ordering and holding costs
- a.are relatively stable.
- b.are relatively stable around the economic order quantity.
- c.are relatively unstable around the economic order quantity.
- d.are unstable.
- e.none of the above
If demand increases by a factor of k, the optimal lot size increases by a factor of
- a.k.
- b.k/2.
- c.k + 2.
- d.k-squared.
- e.the square root of k.
If demand increases by a factor of k, the number of orders placed per year should increase by a factor of
- a.k.
- b.k/2.
- c.k + 2.
- d.k-squared.
- e.the square root of k.
To reduce the optimal lot size by a factor of k, the fixed order cost S must be
- a.increased by a factor of k.
- b.increased by a factor of k-squared.
- c.reduced by a factor of k-squared.
- d.reduced by a factor of the square root of k.
- e.reduced by a factor of k.
Aggregating across products, retailers, or suppliers in a single order allows for
- a.an increase in lot size for individual products.
- b.an increase in customer demand.
- c.a reduction in holding cost per unit.
- d.a reduction in lot size for individual products.
- e.a reduction in purchase price per unit.
Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because
- a.fixed ordering and transportation costs are now charged to retailers.
- b.fixed ordering and transportation costs are now charged to suppliers.
- c.fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
- d.holding costs are now charged to retailers or suppliers.
- e.holding costs are now spread across multiple products, retailers, or suppliers.
A key to reducing cycle inventory is
- a.the reduction of holding cost.
- b.the reduction of manufacturing cost.
- c.the reduction of lot size.
- d.the reduction of warehouse space.
- e.all of the above
A key to reducing lot size without increasing costs is to
- a.reduce the holding cost associated with each lot.
- b.reduce the fixed cost associated with each lot.
- c.reduce the material cost associated with each lot.
- d.reduce the manufacturing cost associated with each lot.
- e.increase the holding cost associated with each lot.
When developing estimates for holding and ordering costs, it is important to
- a.estimate these costs to a high level of precision.
- b.get a good approximation quickly.
- c.develop estimates that will not be changed.
- d.both a and c
- e.none of the above
Which cost takes into account the return demanded on the firm’s equity and the amount the firm must pay on its debt?
- a.cost of capital
- b.obsolescence (spoilage) cost
- c.handling cost
- d.occupancy cost
- e.none of the above
Which cost estimates the rate at which the value of the product being stored drops either because the market value of that product drops or because the product quality deteriorates?
- a.cost of capital
- b.obsolescence (spoilage) cost
- c.handling cost
- d.occupancy cost
- e.none of the above
Which cost should only include receiving and storage costs that vary with the quantity of product received?
- a.cost of capital
- b.obsolescence (spoilage) cost
- c.handling cost
- d.occupancy cost
- e.none of the above
Which cost should reflect the incremental change in space cost due to changing cycle inventory?
- a.cost of capital
- b.obsolescence (spoilage) cost
- c.handling cost
- d.occupancy cost
- e.none of the above
Which of the following would not be a component of order cost?
- a.buyer time
- b.transportation cost
- c.handling cost
- d.receiving cost
- e.All of the above are components of order cost.

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