1. Which of the following statements is NOT true?

A. the annual cost of ordering depends on the number of orders per year

B. the annual cost of ordering can be reduced by ordering less at any one time

C. the annual cost of carrying inventory can be decreased by ordering less at one time

D. all the above are true

E.none of the above is true

2. A firm uses $20,000 of an item per year. The carrying cost is 25%, the cost of ordering is $10 and the order quantity is $1,000. The annual total cost of carrying plus ordering would be:

A. $2,500

B. $5,000

C. $500

D.$816

E. none of the above

3.The Period order quantity:

A.Can only be applied to continuous demand

B. Orders a constant amount for a set number of periods.

C.Works like a quantity discount.

D.Is based on the same assumptions as the EOQ model

E. Orders the same quantity each period.

4. A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not?

A.purchase cost

B.cost of carrying inventory

C.cost of placing one order

D.all of the above are relevant

E.none of the above is relevant

5.Which of the following are basic systems for determining when to order INDEPENDENT demand items?

I.Order point system

II. Periodic review system

III. Material Requirements Planning

A. I only

B. II only

C. I and II only

D. I and III only

E. II and III only

6.Which of the following statements is best?

A. order point = DDLT + SS

B. average inventory = Q ÷ 2 + SS

C. safety stock is always needed

D. a and b are true

E. d and c are true

7. If the standard deviation of demand is 100 units and the average demand is 1000 units, then we can be 95% confident that actual sales will be 1000 units plus or minus about:

A.100 units

B.150 units

C. 200 units

D.300 units

E.400 units

8. If the lead time is 2 weeks, the average demand 100 units per week and the safety stock is 50 units, the reorder point will be

A. 150 units

B. 200 units

C. 250 units

D. 300 units

E. none of the above

9.If the on-hand inventory is 40 units, the safety stock 20 units and the target level is 120 units, then an order should be placed for:

A.100 units

B.80 units

C.60 units

D.40 units

E.20 units

10.A company that keeps no safety stock can expect an average service level of

A.0%

B.15%

C.50%

D.85%

E.Safety stock does not affect the service level.

## Expert Answer

1. Option E – None of the above is true

2.Option A – 2500

3. Option B. Orders a constant amount for a set number of periods

4. Option D.all of the above are relevant

5. Option C. I and II only

6. Option D

7. Option A – 100 units

8. Option C – 250 units

**Reorder point** = daily **demand** x **lead time** + **safety stock**

9. Answer is Option B – 80 units = 120 – 40 = 80

10. Option E – Safety stock does not affect the service level.