5. Which of the following statements regarding the economic order quantity ( EOQ ) is true?
1. if materials handling costs were to drop, the inventory carry cost per unit of an item would decrease and the EOQ would also decrease.
2. the EOQ model assumes a variable demand pattern.
3. the EOQ model combines several different item orders to the same supplier.
4. if an order quantity is larger than the EOQ, the annual holding (carry) cost for inventory exceeds the annual ordering cost.
6. In the basic EOQ model, if lead time increases from 3 to 6 days, the EOQ will:
a. double.
b. increase, but not double.
c. remain the same.
d. decrease by a factor of '2'.
7. Consider a piecemeal replenishment situation where the production rate is 100 units per day, the demand (consumption) rate is 4 units per day, and the economic production lot size is 500 units. Which of the following statements is true?
a. the average inventory per cycle is 250 units.
b. the average inventory per cycle is greater than 250 units.
c. the rate of buildup in inventory during the production cycle is less than 100 units per day.
d. the rate of buildup in inventory during the production cycle is greater than, or equal to 400 units per day.
8. An item experiences an annual demand of 7,200 units. It costs $8.00 to hold the item in inventory for one year and $16.00 to place an order. If the EOQ model is used, what is the time between orders?
a. less than 1 week.
b. greater than 1 week but <= 2 weeks.
c. greater than 2 weeks but <= 3 weeks.
d. greater than 3 weeks.
9. Annual demand for a product is 1,600 units, and the holding cost is $2.00 per unit per year. The cost of setting up the production line is $25.00 . There are 200 working days per year. The production manager decided to produce 200 units each time she started production. If it takes her 4 days to produce the 200 units, what was her production rate?
a. 80 units per day.
b. 60 units per day.
c. 50 units per day.
d. 100 units per day.
e. 40 units per day.
10. Judith Thompson is the manager of the student center cafeteria. She orders frozen pizzas and bakes them on the premises. She anticipates a weekly demand of ten (10) pizzas. The cafeteria is open 45 weeks a year, 5 days a week. The ordering cost is $15.00 and the holding cost is $0.40 per pizza per year. What is the optimal number of pizzas Judith should order?
a. 184
b. 9
c. 5
d. 28
e. none of the above.
11. Given the data in the previous question, the pizza vendor has a four (4) day leadtime, and Judith wants to maintain 1 pizza for safety stock. What is the least cost reorder point ?
a. 10
b. 8
c. 4
d. 9
e. none of the above.
12. The annual demand for a product is 1,000 units. The company orders 200 units each time an order is placed. The leadtime is six (6) days. There are 250 working days per year. If the reorder point is 50 units, what safety stock are they using ?
a. 22
b. 4
c. 26
d. 28
e. none of the above.
13. A manager is using the normal distribution to determine the safety stock for a product. The z-value of 2.33 would be associated with what service level ?
1. 95%
2. 97.5%
3. 98%
4. 99%
5. none of the above.