MULTIPLE CHOICE : ( select the most correct response ) Which one of the followin
ID: 2748430 • Letter: M
Question
MULTIPLE CHOICE : ( select the most correct response )
Which one of the following is an aggressive alternative for aggregate
planning?
use seasonal inventories to buffer the manufacturing process from
variations in customer demand.
offer complementary products or services with contra-cyclical demand
requirements.
use overtime and undertime to change workforce levels.
use subcontracting to overcome short-term capacity shortages.
Which of the following factors is (are) NOT included in ordering cost ?
bill paying.
obsolescence.
purchasing department overhead costs.
inspecting incoming inventory.
development and authorization of purchase orders.
Possible decision variables that should be considered for aggregate plans
include:
equipment rental.
extra labor shifts.
backordering.
all of the above.
none of the above.
-2-
Regarding the master production schedule (MPS) :
the external suppliers are sent copies of the MPSs in advance.
the time horizon of the MPSs must equal the time horizon of the
selected aggregate plan.
the capacity requirements of the MPSs must equal or exceed the available capacity of the selected aggregate plan.
all of the above.
none of the above.
5. Which of the following statements regarding the economic order quantity
( EOQ ) is true?
if materials handling costs were to drop, the inventory carry cost per unit of an item would decrease and the EOQ would also decrease.
the EOQ model assumes a variable demand pattern.
the EOQ model combines several different item orders to the same supplier.
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.
-3-
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.
-4-
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 work-
ing 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 ?
95%
97.5%
98%
99%
none of the above.
Explanation / Answer
MULTIPLE CHOICE : ( select the most correct response )
use seasonal inventories to buffer the manufacturing process from variations in customer demand.
offer complementary products or services with contra-cyclical demand requirements.
use overtime and undertime to change workforce levels.
use subcontracting to overcome short-term capacity shortages.
bill paying.
obsolescence.
purchasing department overhead costs.
inspecting incoming inventory.
development and authorization of purchase orders.
equipment rental.
extra labor shifts.
backordering.
all of the above.
none of the above.
-2-
4. Regarding the master production schedule (MPS) :
the external suppliers are sent copies of the MPSs in advance.
the time horizon of the MPSs must equal the time horizon of the selected aggregate plan.
the capacity requirements of the MPSs must equal or exceed the available capacity of the selected aggregate plan.
all of the above.
none of the above.
5. Which of the following statements regarding the economic order quantity ( EOQ ) is true?
if materials handling costs were to drop, the inventory carry cost per unit of an item would decrease and the EOQ would also decrease.
the EOQ model assumes a variable demand pattern.
the EOQ model combines several different item orders to the same supplier.
if an order quantity is larger than the EOQ, the annual holding (carry) cost for inventory exceeds the annual ordering cost.
EOQ, Q = [(2 × Quantity × Cost Per Order )/ Holding 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.
Workings
EOQ = 500
Production rate = 100, Demand = 4
Average inventory level = Q/2 * (1- (d/p)) = (500/2)*(1-(4/100)) = 240 units
Maximum inventory level = Q * (1- (d/p)) = 500*(1-(4/100)) = 480
I have taken the closest answer here.
-3-
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.
Working
EOQ, Q = [(2 × Quantity × Cost Per Order )/ Holding cost]
= [(2 × 7200 × 16 )/ 8] = 170
No. of orders = 7200/170 = 42.3, Rounding off 43.
Time between orders = No.of working days/No.of orders = 365/43 = 8.5days
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.
Working
Production rate = No.of units /time = 200/4 = 50.
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.
Working
EOQ, Q = [(2 × Quantity × Cost Per Order )/ Holding cost]
Q = [(2 × (45*10) × 15 )/ .4] = 184
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.
Workings
Safety Stock = 1
Mean demand per day = (45*10*5)/365 = 6.16 , rounding off 7.
mean demand during replenishment lead time = 7*4 = 28
Reorder point = mean demand during replenishment lead time + safety stock
Reorder point = 28+1 = 29.
-4-
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 work-
ing 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.
Workings :
Safety Stock = Zd
Reorder point = mean demand during replenishment lead time + safety stock
Mean demand per day = (1000/250) = 4
Lead-time demand = 4*6 = 24
Reorder point = 24+safety stock = 50, => safety stock = 26
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 ?
95%
97.5%
98%
99%
none of the above.
Working:
Normsinv(.99) = 2.33
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