primary purpose of the basic economic order quantity model is
a. 
to calculate the reorder 
b. 
to minimize the sum of 
c. 
to maximize the customer 
d. 
to minimize the sum of setup 
e. 
to calculate the optimum 
12. If
an item is ordered at its economic order quantity, the annual carrying cost
should be:
a. 
slightly less than the annual 
b. 
equal to the annual ordering 
c. 
twice the annual purchase 
d. 
the square root of the annual 
e. 
cannot be determined because 
13. What
inventory factor may be omitted from the basic EOQ derivation because it is a
constant?
a. 
Annual orderprocessing cost 
b. 
Annual purchase cost of goods 
c. 
Annual capital cost 
d. 
Annual setup costs 
e. 
all of these 
14. Which
of the following is not an assumption of the economic order quantity model?
a. 
Demand is known, constant, 
b. 
Lead time is known and 
c. 
Quantity discounts are not 
d. 
Production and use can occur 
e. 
The only variable costs are 
15. The
cost of a widget is $5, and the carrying rate is 40%; cost of processing an
order is $25, annual demand is for 400 widgets, and supply and usage patterns
are stable. What is the economic order quantity (EOQ)?
a. 
5 
b. 
20 
c. 
25 
d. 
100 
e. 
200 
16. If
usage is constant, as order size increases, annual order costs ____ but annual
carrying costs ____.
a. 
increase ….. increase 
b. 
decrease ….. decrease 
c. 
increase ….. decrease 
d. 
decrease ….. increase 
e. 
remain the same ….. 
17. Which
one of the following statements regarding the economic order quantity is true?
a. 
The EOQ model combines 
b. 
If an order quantity is 
c. 
The EOQ model assumes a 
d. 
When the interest rate drops, 
e. 
EOQ is used to determine the 
18. Use
this information below to calculate the optimal order quantity:
Annual demand for backpacks 

The cost to place an order is 

The per unit cost of the item 

The annual holding rate is 
Choose the closest answer.
a. 
920 units 
b. 
250 units 
c. 
710 units 
d. 
830 units 
19. If
your company had an annual purchase cost of items equal to $2,000,000, an
annual holding cost of $150,000 and an annual ordering cost of $750,000 this
scenario would reveal that:
a. 
Your fixed lot size was lower 
b. 
Your fixed lot size was equal 
c. 
Your fixed lot size was 
d. 
Nothing because there is 
20. The
EOQ model with quantity discounts attempts to determine
a. 
what is the lowest purchasing 
b. 
whether to use fixedquantity 
c. 
how many units should be 
d. 
what is the shortest lead 
e. 
what is the lowest amount of 
Figure 71
Use the graph below to answer
the question(s).
.jpg”>
21. Which
of the following is TRUE in relation to Figure 71?
a. 
Curve J represents the annual 
b. 
A lot size of G has an annual 
c. 
At lot size H both holding 
d. 
The EOQ is most likely lot 
22. If
the actual order quantity is the economic order quantity in a problem that
meets the assumptions of the model, the average amount of inventory on hand
a. 
is zero 
b. 
is affected by the amount of 
c. 
is onehalf of the economic 
d. 
is smaller than the holding 
e. 
cannot be determined from the 
23. In
the absence of demand and delivery lead time variation, if demand is eight per
day and purchase lead time is four days, the reorder point is:
a. 
3. 
b. 
8. 
c. 
32. 
d. 
35. 
e. 
56. 
24. In
the absence of demand and delivery lead time uncertainty, reorder point is the
____.
a. 
demand during lead time 
b. 
safety stock 
c. 
sum of demand during lead 
d. 
economic order quantity 
e. 
average inventory 
25. The
UNLV Bookstore sells a unique calculator to college students. The demand for
this calculator has a normal distribution with an average daily demand of 20
units and a standard deviation of 4 units per day. The lead time for this
calculator is very stable at 9 days. Compute the statistical reorder point that
results in a 95 percent instock probability (Z = 1.65).
a. 
19.8 units 
b. 
80 units 
c. 
180 units 
d. 
199.8 units 
e. 
720 units 