**INSTANT DOWNLOAD WITH ANSWERS**

#### Quantitative Analysis For Management 13th by Barry Render -Test Bank

*Quantitative Analysis for Management, 13e*** (Render et al.)**

**Chapter 6Â Inventory Control Models**

**Â **

1) Inventory is such an expensive asset that it may account for as much as 50 percent of a firm’s invested capital.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â INTRODUCTION

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

2) The same ratio of marginal loss to the sum of marginal loss and marginal profit is used to solve one-period inventory models for both discrete and continuous probability distributions.

Answer:Â TRUE

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

3) In the decoupling function, some inventory may be stored between each production process to act as a buffer.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

4) Service level is the chance, measured in percent, that there will be a stockout.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Concept

5) A stockout is a situation that occurs when there is no inventory on hand.

Answer:Â TRUE

Diff:Â Easy

Topic:Â INTRODUCTION

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

6) The concept of inventory is applicable to both manufacturing and service organizations.

Answer:Â TRUE

Diff:Â Easy

Topic:Â INTRODUCTION

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

7) One reason inventory is required is the uneven flow of resources through a company.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

8) Inventory is any stored resource that is used to satisfy a current or future need.

Answer:Â TRUE

Diff:Â Easy

Topic:Â INTRODUCTION

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

9) Economic order quantity (EOQ) analysis has recently become practical as a consequence of high-speed computers.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

10) Inventory is the common thread that ties all the functions and departments of the organization together.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â INTRODUCTION

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

11) The purpose of the EOQ model is to achieve a balance between the cost of holding inventory and the cost of stockouts.

Answer:Â FALSE

Diff:Â Easy

Topic: Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

12) A major objective of inventory models is to minimize inventory costs.

Answer:Â TRUE

Diff:Â Easy

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

13) The two fundamental decisions you must make when controlling inventory are “How much to order? and “What does it cost?”

Answer:Â FALSE

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

14) The production run model is useful when a firm purchases inventory that is delivered over a period of time.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Concept

15) Salaries and wages for warehouse employees would be categorized as ordering cost factors.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

16) Spoilage, theft and obsolescence are all considered to be carrying cost factors.

Answer:Â TRUE

Diff:Â Easy

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

17) An increase in holding cost will increase the economic order quantity, holding all other factors constant.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

18) An increase in ordering cost will increase the economic order quantity, holding all other factors constant.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

19) The reorder point occurs during a stockout.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Concept

20) Safety stock is ignored when computing the reorder point.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Concept

21) In a quantity discount model, the purchase cost or material cost must be included in the total cost calculation.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Concept

22) Theft is one of the “ordering cost factors.”

Answer:Â FALSE

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

23) Purchasing department supplies comprise one of the “carrying cost factors.”

Answer:Â FALSE

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

24) We can usually determine an appropriate safety stock even if we are unable to accurately assess the actual cost of a stockout.

Answer:Â TRUE

Diff:Â Easy

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Concept

25) One of the assumptions of the basic EOQ model is that the receipt of inventory is instantaneous.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

26) ABC analysis places inventory into 26 categories for computer analysis.

Answer:Â FALSE

Diff:Â Easy

Topic: Â ABC ANALYSIS

LO:Â 6.9: Understand the importance of ABC analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

27) In ABC inventory analysis, items in the “A” group should have the lowest dollar value to the firm.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â ABC ANALYSIS

LO:Â 6.9: Understand the importance of ABC analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

28) The costs involved in a typical inventory model are order costs, management costs, and holding costs.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

29) ERP systems are expensive to buy and costly to customize.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

30) In the optimal decision rule using marginal analysis for the single period model, we will stock an additional unit as long as the probability of selling one or less unit is less than the ratio ML/(ML + MP) where ML is marginal loss and MP is marginal profit.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

31) For the single-period model, if marginal loss increases relative to marginal profit, then the optimal order quantity will increase.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

32) Kanban is a Japanese word that literally means *box*.

Answer:Â FALSE

Diff: Â Moderate

Topic:Â JUST-IN-TIME INVENTORY CONTROL

LO:Â 6.11: Discuss just-in-time inventory concepts to reduce inventory levels and costs.

AACSB:Â Analytical thinking

Classification:Â Concept

33) At a minimum, one container is required using the Kanban system.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â JUST-IN-TIME INVENTORY CONTROL

LO:Â 6.11: Discuss just-in-time inventory concepts to reduce inventory levels and costs.

AACSB:Â Analytical thinking

Classification:Â Concept

34) Which of the following is __not__ a use of inventory?

- A) the decoupling function
- B) quantity discounts
- C) irregular supply and demand
- D) the translucent function

Answer:Â D

Diff:Â Easy

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

35) In making inventory decisions, the purpose of the basic EOQ model is to

- A) minimize carrying costs.
- B) minimize ordering costs.
- C) minimize the sum of carrying costs and ordering costs.
- D) minimize customer dissatisfaction.

Answer:Â C

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

36) Which of the following is __not__ considered a significant inventory cost?

- A) cost of production labor
- B) purchase cost
- C) cost of stockouts
- D) cost of carrying an item

Answer:Â A

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

37) Which of the following is part of the determination of EOQ?

- A) cost of production labor
- B) cost of stockouts
- C) purchase cost
- D) annual demand

Answer:Â D

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

38) Which of the following factors is __not__ included in ordering cost?

- A) bill paying
- B) obsolescence
- C) purchasing department overhead costs
- D) inspecting incoming inventory

Answer:Â B

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

39) Which of the following factors is __not__ included in carrying cost?

- A) spoilage
- B) obsolescence
- C) cost of capital
- D) inspecting incoming inventory

Answer:Â D

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

40) Mark Achin sells 3,600 electric motors each year. The cost of these is $200 each, and demand is constant throughout the year. The cost of placing an order is $40, while the holding cost is $20 per unit per year. There are 360 working days per year and the lead-time is 5 days. If Mark orders 200 units each time he places an order, what would his total ordering cost be for the year?

- A) $2,000
- B) $2,720
- C) $200
- D) $720

Answer:Â D

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

41) The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. The purchase cost is $40 per unit. There are 250 working days per year. Currently, the company is ordering 500 units each time an order is placed. Assuming the company uses a safety stock of 20 units resulting in a reorder point of 60 units, what is the expected lead-time for delivery?

- A) 4 days
- B) 5 days
- C) 6 days
- D) 7 days

Answer:Â B

Diff:Â Difficult

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

42) The objective of a(n) ________ system is to reduce costs by integrating all of the operations of a firm.

- A) MRP
- B) ERP
- C) JIT
- D) VMI

Answer:Â B

Diff:Â Moderate

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

43) R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. If R. C. orders 500 units each time he places an order, what would the total annual holding cost be?

- A) $450
- B) $1,200
- C) $1,250
- D) $2,400

Answer:Â B

Diff:Â Moderate

Topic:Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Application

44) Which of the following is __not__ an assumption for the basic EOQ model?

- A) Only an integer number of orders can be made each year.
- B) Quantity discounts are not possible.
- C) Inventory receipt is instantaneous (all at once).
- D) With orders placed at the correct time, there will be no shortages.

Answer:Â A

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

45) For the basic EOQ model, which of the following relationships is __not__ true?

- A) The optimal number of orders per year equals annual demand divided by the EOQ.
- B) The reorder point equals daily demand multiplied by the lead-time in days, excluding safety stock.
- C) Average inventory level equals one-half the order size.
- D) The average dollar level of inventory equals unit price multiplied by order quantity.

Answer:Â D

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

46) The EOQ model without the instantaneous receipt assumption is commonly called the

- A) quantity discount model.
- B) safety stock model.
- C) planned shortage model.
- D) production run model.

Answer:Â D

Diff:Â Moderate

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Concept

47) Which of the following is __not__ a potential drawback of an ERP system?

- A) Training employees on the use of the new software can be expensive.
- B) The software is costly to customize.
- C) The implementation may require a company to change its normal operations.
- D) It does not incorporate inventory control decisions.

Answer:Â D

Diff:Â Easy

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

48) All of the following are used for marginal analysis with the normal distribution in a single period model __except__

- A) mean sales for the product.
- B) marginal profit for the product.
- C) marginal loss for the product.
- D) median sales for the product.

Answer:Â D

Diff:Â Easy

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

49) A structure tree of the components in a product, with a description and the quantity required to make each product is called a(n)

- A) ERP system.
- B) MRP system.
- C) master production schedule.
- D) Bill of Materials.

Answer: Â D

Diff:Â Easy

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

LO:Â 6.10: Describe the use of material requirements planning in solving dependent-demand inventory problems.

AACSB:Â Analytical thinking

Classification:Â Concept

50) Sensitivity analysis of EOQ refers to

- A) the attitude of top management toward the use of the EOQ model.
- B) analysis of how much the EOQ will change if different input values are used.
- C) an assessment of the impact of obsolescence upon the EOQ.
- D) a study of the impact of storing incompatible products in the same warehouse.

Answer:Â B

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

51) Which of the following is __not__ a benefit of a well-developed ERP system?

- A) It is relatively inexpensive to customize.
- B) It can integrate all of the operations of a firm.
- C) It can reduce transaction costs.
- D) It can increase speed of information.

Answer:Â A

Diff:Â Moderate

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

52) The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. Currently, the company is ordering 250 units each time an order is placed. What is the total holding cost for the year using this policy?

- A) $400
- B) $1,000
- C) $1,400
- D) $2,000

Answer:Â B

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

53) Mark Achin sells 3,600 electric motors each year. The cost of these is $200 each, and demand is constant throughout the year. The cost of placing an order is $40, while the holding cost is $20 per unit per year. There are 360 working days per year and the lead-time is 5 days. What is his economic order quantity in units?

- A) 100
- B) 200
- C) 60
- D) 120

Answer:Â D

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

54) Andre Candess manages an office supply store. One product in the store is computer paper. Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year. There are 250 working days per year and the lead-time is 3 days. The cost of placing an order is $30, while the holding cost is $15 per box per year. If he orders in batches of 500 boxes at a time, what is his annual ordering cost?

- A) $200
- B) $400
- C) $600
- D) $800

Answer:Â C

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

55) Andre Candess manages an office supply store. One product in the store is computer paper. Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year. There are 250 working days per year and the lead-time is 3 days. The cost of placing an order is $30, while the holding cost is $15 per box per year. If he orders in batches of 500 boxes at a time, what is his annual holding cost?

- A) $1500
- B) $3000
- C) $3750
- D) $4500

Answer:Â C

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

56) Daniel has computed the EOQ for a product he sells to be 400 units. However, due to recent events he has a cash flow problem. Therefore, he orders only 100 units each time he places an order. Which of the following is true for this situation?

- A) Annual ordering cost will be lower than annual holding cost.
- B) Annual ordering cost will be higher than annual holding cost.
- C) Annual ordering cost will equal annual holding cost.
- D) Annual ordering cost will be unaffected by the order policy change.

Answer:Â B

Diff:Â Difficult

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

57) With ________, inventory arrives just before it is needed.

- A) VMI
- B) ABC
- C) ERP
- D) JIT

Answer:Â D

Diff:Â Easy

Topic:Â JUST-IN-TIME INVENTORY CONTROL

LO:Â 6.11: Discuss just-in-time inventory concepts to reduce inventory levels and costs.

AACSB:Â Analytical thinking

Classification:Â Concept

58) In a JIT system, inventory managers can uncover bottlenecks by introducing or removing which of the following?

- A) C-kanbans
- B) P-kanbans
- C) E-kanbans
- D) T-kanbans

Answer:Â B

Diff:Â Moderate

Topic:Â JUST-IN-TIME INVENTORY CONTROL

LO:Â 6.11: Discuss just-in-time inventory concepts to reduce inventory levels and costs.

AACSB:Â Analytical thinking

Classification:Â Concept

59) Which of the following does __not__ have an impact on EOQ?

- A) safety stock
- B) demand per unit time
- C) order cost
- D) holding cost

Answer:Â A

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

60) The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4. If they have calculated a reorder point of 46.60 units, what service level are they assuming?

- A) 85 percent
- B) 90 percent
- C) 95 percent
- D) 97.5 percent

Answer:Â C

Diff:Â Difficult

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

61) Judith Thompson is the manager of the student center cafeteria. She is introducing pizza as a menu item. The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria. Judith anticipates a weekly demand of 10 pizzas. The cafeteria is open 45 weeks a year, 5 days a week. The ordering cost is $15 and the holding cost is $0.40 per pizza per year. What is the optimal number of pizzas Judith should order?

- A) 184 pizzas
- B) 9 pizzas
- C) 5 pizzas
- D) 28 pizzas

Answer:Â A

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

62) What shows how many units are needed at every level of production?

- A) production level tree
- B) material requirements tree
- C) decision tree
- D) material structure tree

Answer:Â D

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

LO:Â 6.10: Describe the use of material requirements planning in solving dependent-demand inventory problems.

AACSB:Â Analytical thinking

Classification:Â Concept

63) SAP, Oracle, and PeopleSoft are all examples of

- A) MRP systems.
- B) ERP systems.
- C) JIT systems.
- D) EDI systems.

Answer:Â B

Diff:Â Moderate

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

64) R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. If R. C. wishes to minimize his total annual inventory costs, he must evaluate the total cost for two possible order quantities. What are these two possible quantities? (Round answer to nearest unit.)

- A) 300 and 306
- B) 300 and 500
- C) 306 and 50
- D) 200 and 306

Answer:Â B

Diff:Â Moderate

Topic:Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Application

65) The annual demand for a product is 1,000 units. The company orders 200 units each time an order is placed. The lead-time is 6 days, and the company has determined that 20 units should be held as a safety stock. There are 250 working days per year. What is the reorder point?

- A) 20
- B) 24
- C) 44
- D) 120

Answer:Â C

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

66) The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. Currently, the company is ordering 500 units each time an order is placed. What should be the reorder point (excluding any safety stock) under the current policy?

- A) 48
- B) 100
- C) 6
- D) 24

Answer:Â A

Diff:Â Moderate

Topic:Â REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

67) Andre Candess manages an office supply store. One product in the store is computer paper. Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year. There are 250 working days per year and the lead-time is 3 days. The cost of placing an order is $30, while the holding cost is $15 per box per year. If Andre orders 500 boxes each time he orders from his supplier, what would his total annual inventory cost be (holding cost plus ordering cost)?

- A) $3,000
- B) $4,350
- C) $3,075
- D) $3,750

Answer:Â B

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

68) Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The holding cost is $2 per unit per year. The cost of setting up the production line for this is $25. There are 200 working days per year. The production rate for this product is 80 per day. If the production order quantity is 200 units, what was the daily demand (rounded to the nearest whole unit)?

- A) 6 units
- B) 7 units
- C) 8 units
- D) 9 units

Answer:Â B

Diff:Â Difficult

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Application

69) The “point at which to reorder” depends directly on which of the following?

- A) EOQ
- B) ordering cost
- C) lead-time
- D) storage costs

Answer:Â C

Diff:Â Moderate

Topic:Â REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Concept

70) Judith Thompson, the manager of the student center cafeteria, has added pizza to the menu. The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria. Judith anticipates a weekly demand of 10 pizzas. The cafeteria is open 45 weeks a year, 5 days a week. The ordering cost is $15 and the holding cost is $0.40 per pizza per year. The pizza vendor has a 4-day lead-time and Judith wants to maintain 1 pizza for safety stock. What is the optimal reorder point?

- A) 10
- B) 8
- C) 4
- D) 9

Answer:Â D

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

71) R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. How many units should R. C. order to minimize his total annual inventory cost? (Round your answer to the nearest unit.)

- A) 300
- B) 306
- C) 500
- D) 200

Answer:Â C

Diff:Â Difficult

Topic:Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Application

72) The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. How many units should the company order each time an order is placed if the company wishes to minimize total inventory cost?

- A) 100
- B) 200
- C) 250
- D) 500

Answer:Â A

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

73) Consider the material structure tree for item A. If 20 units of A are needed, how many units of D are needed?

- A) 30
- B) 160
- C) 60
- D) 220

Answer:Â D

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

LO:Â 6.10: Describe the use of material requirements planning in solving dependent-demand inventory problems.

AACSB:Â Analytical thinking

Classification:Â Application

74) Consider the material structure tree for item A. If 10 units of A are needed, how many units of E are needed?

- A) 60
- B) 6
- C) 240
- D) 24

Answer:Â C

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

75) Extra inventory that is used to avoid stockouts is known as

- A) planned shortages.
- B) quantity discounts.
- C) safety stock.
- D) service level.

Answer:Â C

Diff:Â Easy

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Concept

76) An inventory model that can handle dependent demand is called a(n)

- A) MRP system.
- B) JIT system.
- C) ERP system.
- D) Kanban system.

Answer:Â A

Diff:Â Easy

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Concept

77) As the service level increases

- A) safety stock increases at a decreasing rate.
- B) safety stock increases at an increasing rate.
- C) safety stock decreases at an increasing rate.
- D) safety stock decreases at a decreasing rate.

Answer:Â B

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Concept

78) A person is using the normal distribution to determine the safety stock for a product. What z value would be associated with a 90 percent service level?

- A) 0.90
- B) 1.28
- C) 0.53
- D) 0.64

Answer:Â B

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

79) The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4. If the company wishes to maintain a 90 percent service level, how much safety stock should be held?

- A) 45.12
- B) 41.28
- C) 1.28
- D) 5.12

Answer:Â D

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

80) The annual demand for a product is 1,000 units. The company orders 200 units each time an order is placed. The lead-time is 6 days. There are 250 working days per year. If the reorder point is 50, what safety stock are they using?

- A) 22
- B) 4
- C) 26
- D) 28

Answer:Â C

Diff:Â Difficult

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

81) The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. The purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. Currently, the company is ordering 500 units each time an order is placed. What level of safety stock would give a reorder point of 60 units?

- A) 10
- B) 14
- C) 18
- D) 12

Answer:Â D

Diff:Â Difficult

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

82) A person is using the normal distribution to determine the safety stock for a product. The Z value of 1.65 would be associated with what service level?

- A) 90 percent
- B) 95 percent
- C) 100 percent
- D) 92.5 percent

Answer:Â B

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

83) A person 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?

- A) 95 percent
- B) 97.5 percent
- C) 98 percent
- D) 99 percent

Answer:Â D

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

84) Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The annual demand for a particular stapler is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line is $25. There are 200 working days per year. The production rate for this product is 80 per day. If Rolf decided to produce 200 units each time he started production of the stapler, what would his maximum inventory level be?

- A) 200
- B) 180
- C) 100
- D) 90

Answer:Â B

Diff:Â Difficult

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Application

85) Fresh First grocery store purchases bread at $1 per loaf and sells it at $1.50 a loaf. Any unsold bread is fed to the geese at a local pond. What is the decision rule?

- A) Stock an additional unit if
*P*â‰¥ 0.33. - B) Stock an additional unit if
*P*â‰¥ 0.4. - C) Stock an additional unit if
*P*â‰¥ 0.5. - D) Stock an additional unit if
*P*â‰¥ 0.67.

Answer:Â D

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

86) Which of the following statements concerning ABC analysis is __false__?

- A) Class B items typically account for 20 percent of the company’s business in dollars.
- B) There are typically less class A items in stock than class B.
- C) Class C items typically account for 70 percent of the company’s inventory items.
- D) Class C items tend to have more complex inventory policies than Class B items.

Answer:Â D

Diff:Â Moderate

Topic:Â ABC ANALYSIS

LO:Â 6.9: Understand the importance of ABC analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

87) With an annual demand of 2,400 units, daily demand of 10 units, and daily production rate of 40 units, a company has determined that each production run will be for 200 units. If production starts when the inventory level is at zero, how many units would actually be in the warehouse at the end of the first day of production? (Round your answer to the nearest unit.)

- A) 12
- B) 20
- C) 30
- D) 40

Answer:Â C

Diff:Â Moderate

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Application

88) Jack Spratt is the production manager for a manufacturing firm that produces wizzy-gadgets and other items. The annual demand for a particular wizzy-gadget is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line is $25. There are 200 working days per year. The production rate for this product is 80 per day. If his maximum inventory level is 180 units, how many units did he produce each time he started production of the wizzy-gadgets?

- A) 200
- B) 180
- C) 100
- D) 90

Answer:Â A

Diff:Â Difficult

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Application

89) Rose Arena is the production manager for a manufacturing firm that produces buggy whips and other items. The annual demand for a particular buggy whip is 1,600 units. The holding cost is $2 per unit per year. The cost of setting up the production line is $25. There are 200 working days per year. Rose decided to produce 200 units each time she started production of the buggy whips. If it took her 4 days to produce the 200 units, what was her production rate?

- A) 80 units/day
- B) 60 units/day
- C) 50 units/day
- D) 100 units/day

Answer:Â C

Diff:Â Easy

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Application

90) An organization hosting a 5K race is looking to sell t-shirts at the event. Demand for t-shirts is believed to be normally distributed with a mean of 100 and standard deviation of 15. With a marginal loss of $4 and marginal profit of $5, how many t-shirts should the organization stock for the 5K race?

- A) 98
- B) 85
- C) 103
- D) 115

Answer:Â C

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

91) Bret’s bakery must decide how many loaves of fresh bread to produce in a single day. Daily demand for fresh bread is normally distributed with a mean of 70 loaves and standard deviation of 18. If the marginal loss is $2 and the marginal profit is $1, how much bread should Bret’s bakery produce in a single day?

- A) 88
- B) 52
- C) 63
- D) 78

Answer:Â C

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

92) Which of the following statements about the kanban system is __false__?

- A) Kanban in Japanese means “card.”
- B) More than two containers can be used.
- C) The kanban system is most commonly executed manually.
- D) One typical kanban rule is that no containers are filled without the appropriate C-kanban.

Answer:Â D

Diff:Â Moderate

Topic:Â JUST-IN-TIME INVENTORY CONTROL

LO:Â 6.11: Discuss just-in-time inventory concepts to reduce inventory levels and costs.

AACSB:Â Analytical thinking

Classification:Â Concept

93) Which of these statements about EOQ is best?

- A) Under the assumptions made to develop the EOQ model, average inventory is one-half of the maximum inventory.
- B) The EOQ model is very sensitive to minor violations of the basic assumptions.
- C) The economic order quantity helps one estimate the cost of holding inventory.
- D) An increase in holding cost will increase the economic order quantity, holding all other factors constant.

Answer:Â A

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Concept

94) The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40. They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each. All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each. What is the marginal profit for a single elementary statistics book?

- A) $40
- B) $105
- C) $117
- D) $222

Answer:Â C

Diff:Â Easy

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

95) The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40. They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each. All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each. What is the marginal loss for a single elementary statistics book?

- A) $40
- B) $65
- C) $105
- D) $117

Answer:Â B

Diff:Â Easy

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

96) The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40. They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each. All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each. What is the probability of sale for the last book that the bookstore should purchase for sale to a student?

- A) 0.357
- B) 0.412
- C) 0.475
- D) 0.525

Answer:Â A

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

97) The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40. They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each. All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each. How many elementary statistics books should the campus bookstore stock for sale to students?

- A) 210
- B) 224
- C) 250
- D) 264

Answer:Â D

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

98) The campus bookstore knows from the past several semesters that a certain elementary statistics book has a demand that is approximated by a normal distribution with a mean of 250 and a standard deviation of 40. They buy these books for $105 each and sell them to unsuspecting undergraduates at $222 each. All demand for this book is realized by the middle of the semester, at which point the bookstore bundles them up and sells them to a vendor in another country for $40 each. How many elementary statistics books should the campus bookstore stock for sale to students?

- A) 210
- B) 224
- C) 250
- D) 264

Answer:Â D

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

99) Hertz Donuts sells artisanal donuts for $25 per dozen to unsuspecting hipsters. It costs them $8 per dozen to make donuts and any unsold donuts are sold as “Oldies But Goodies” for $5 per dozen the next day (or two, no one really pays attention to the sell-by dates). The demand pattern’s probability distribution is displayed in the table.

Daily Sales | Probability | Daily Sales | Probability |

1 | .1 | 5 | .2 |

2 | .1 | 6 | .1 |

3 | .1 | 7 | .1 |

4 | .2 | 8 | .1 |

How many donuts should they make each day to maximize profit?

- A) 4 dozen
- B) 5 dozen
- C) 6 dozen
- D) 7 dozen

Answer:Â C

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

100) Hertz Donuts sells artisanal donuts for $25 per dozen to unsuspecting hipsters. It costs them $8 per dozen to make donuts and any unsold donuts are sold as “Oldies But Goodies” for $5 per dozen the next day (or two, no one really pays attention to the sell-by dates). The demand pattern’s probability distribution is displayed in the table.

Daily Sales | Probability | Daily Sales | Probability |

1 | .1 | 5 | .2 |

2 | .1 | 6 | .1 |

3 | .1 | 7 | .1 |

4 | .2 | 8 | .1 |

If they elect to make 4 dozen donuts per day what is their expected profit?

- A) $46.70
- B) $65.10
- C) $68.00
- D) $80.20

Answer:Â D

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

101) Consider the material structure tree for item A above. If 30 units of A are needed, how many units of D are needed?

- A) 530
- B) 560
- C) 460
- D) 420

Answer:Â D

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

102) Consider the material structure tree for item A above. If 20 units of A are needed, how many units of D are needed if there are already 10 B’s and 10 C’s in inventory?

- A) 180
- B) 240
- C) 260
- D) 360

Answer:Â B

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

103) Consider the material structure tree for item A above. If 30 units of A are needed, how many units of D are needed if there are already 15 B’s, 40 C’s, and 100 D’s in inventory?

- A) 210
- B) 310
- C) 260
- D) 360

Answer:Â A

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

104) Consider the material structure tree for item A above. If 40 units of A are needed, how many units of D are needed if there are already 40 B’s, 40 C’s, and 200 D’s in inventory?

- A) 200
- B) 320
- C) 360
- D) 440

Answer:Â A

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

105) Subcomponent J has a one week lead time and a gross requirement of 57 units in Week 6 to fill order 123. There are already 15 J’s in stock at the beginning of the planning period and these are not needed for any other order other than 123. What should the planned order release for J’s be in Week 5?

- A) 0
- B) 42
- C) 57
- D) 72

Answer:Â B

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

106) Subcomponent J has a one week lead time and a gross requirement of 57 units in Week 6 to fill order 123. There are already 15 J’s in stock at the beginning of the planning period and these are not needed for any other order other than 123. What should be the planned order release for J’s in order to build product at the latest possible completion time?

- A) 42 units in week 5
- B) 42 units in week 6
- C) 57 units in week 5
- D) 57 units in week 6

Answer:Â A

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

107) Subcomponent J has a one week lead time and a gross requirement of 57 units in Week 6 to fill order 123. There are already 15 J’s in stock at the beginning of the planning period and these are not needed for any other order other than 123. What are the gross requirements for J’s in week 6?

- A) 42 units
- B) 15 units
- C) 57 units
- D) 72 units

Answer:Â C

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

108) Which of the following uses of inventory is used to make sure that adjacent process steps in a production line maintain pace?

- A) the decoupling function
- B) quantity discounts
- C) alleviating irregular demand
- D) the translucent function

Answer:Â A

Diff:Â Easy

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

109) Which of the following uses of inventory is used to make sure that when a customer places an order it can be filled immediately?

- A) the decoupling function
- B) quantity discounts
- C) irregular supply and demand
- D) avoiding stockouts and shortages

Answer:Â A

Diff:Â Easy

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

110) Which of the following uses of inventory is used to make sure that highly seasonable production is available throughout the year?

- A) the decoupling function
- B) storing resources
- C) irregular supply and demand
- D) avoiding stockouts and shortages

Answer:Â B

Diff:Â Easy

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

111) One advantage of buying in bulk is

- A) increased spoilage.
- B) elevated carrying costs.
- C) investing in tangible product rather than having cash in an account.
- D) avoiding stockouts and shortages.

Answer:Â D

Diff:Â Moderate

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

112) East Valve Distributors distributes industrial valves and control devices. The Eastern control device has an annual demand of 9,375 units and sells for $100 per unit. The cost of ordering is $160 per order and the average carrying cost per unit per year is $0.75. Determine the economic order quantity.

Answer:Â EOQ = 2,000 units

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

113) A company annually uses 1,200 of a certain spare part that costs $25 for each order and has a $24 annual holding cost. Calculate the total annual cost for order sizes of: 25, 40, 50, 60, and 100. Identify the economic order quantity, and consider the implications for making an error in calculating the economic order quantity.

Answer:Â Total Cost = total ordering cost + total holding cost

Q = 25Â Â Â Â Â Â TC = 1200 + 300 = $1,500

Q = 40Â Â Â Â Â Â TC = 750 + 480 = $1,230

Q = 50Â Â Â Â Â Â TC = 600 + 600 = $1,200

Q = 60Â Â Â Â Â Â TC = 500 + 720 = $1,220

Q = 100Â Â Â Â TC = 300 + 1200 = $1,500

Q* = [(2 Ã— 1200 Ã— 25)/24]1/2 = 50 units per order

Small variations in order quantity will not have a significant impact on total costs.

Diff:Â Difficult

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

114) David and Beth Sheba run a health food store. Their top selling item is called Heavenly Kelp. The annual demand for this is 810 units, and demand is constant throughout the year. The cost of placing an order is $20, while the holding cost per unit per year is $4.

(a) How many orders per year should be placed if they wish to minimize their total cost?

(b) What is the minimum possible annual holding and ordering cost?

Answer:

(a) EOQ = 90 units. Therefore, the number of orders per year is 810/90 = 9 orders per year.

(b) (90/2)4 + 9($20) = $360 total cost

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

115) Everett Mann’s Dream Store sells waterbeds and supplies. The best-selling bed in the store has an annual demand of 400 units. The ordering cost is $40, while the holding cost is $5 per unit per year. There are 250 working days per year, and the lead-time is 6 days.

(a) To minimize total cost, how many units should be ordered each time an order is placed?

(b) If the holding cost per unit was $6 instead of $5, what would the optimal order quantity be?

Answer:

(a) EOQ = 80 units

(b) EOQ = 73.03 units if *C*hÂ = 6.

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

116) Vicky Payne sells beauty supplies. Her annual demand for a particular skin lotion is 7,000 units. The cost of placing an order is $10, while the holding cost per unit per year is 10 percent of the cost. This item currently costs $2.50 if the order quantity is less than 1500. For orders of 1501 units or more, the cost falls to $2.45. To minimize total cost, how many units should Vicky order each time she places an order? What is the minimum total cost?

Answer:Â The EOQ = 1501, the total cost is $17,380.51.

Diff:Â Difficult

Topic: Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Application

117) Elizabeth Kennedy sells beauty supplies. Her annual demand for a particular skin spackle is 17,000 units. The cost of placing an order is $50, while the holding cost per unit per year is 20 percent of the cost. This item currently costs $12.50 if the order quantity is less than 1500. For orders of 1501 units up to 10,000 units the cost falls to $12.45 and for orders of 10,001 or greater, the cost falls to $12.40. To minimize total cost, how many units should Elizabeth order each time she places an order? What is the minimum total cost?

Answer:Â The EOQ = 1501, the total cost is $214,085. Ordering at Q = 824.6 yields a total cost of $214,561.5 and ordering at 10,001 yields a total cost of $223,286.2.

Diff:Â Difficult

Topic:Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Application

118) Suppose that lead-time demand is normally distributed with a mean of 250 units and a standard deviation of 50 units. If a firm wants to maintain a 95% service level, what should the reorder point be?

Answer:Â 250 + 1.65(50) = 332.2 units

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

119) ArtHogan, Ltd., distributes mechanical replacements for human mitral heart valves. Its artificial valve has a demand of 123,456 units per year and sells for $500 per unit. The cost of ordering is $234 per order and the average carrying cost per unit per year is 25% of the unit cost. Determine the economic order quantity.

Answer:Â EOQ = 680 units

Diff:Â Moderate

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

120) Furniture Manufacturers Inc. uses 20,000 loads of lumber per year. A load of lumber costs $500 and the carrying cost is 10 percent of the unit cost. The cost to order is $200 per order and the lead-time is three working days. Assuming 200 working days, determine:

(a) the economic order quantity.

(b) the reorder point.

(c) number of orders per year.

(d) working days between orders.

Answer:

(a) EOQ = 400 units

(b) ROP = 100(3) = 300 units

(c) number of orders per year = D/Q = 20,000/400 = 50 orders

(d) working days between orders = 200/50 = 4 days

Diff:Â Difficult

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER & REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

121) A company uses 1,500 per year of a certain subassembly that has an annual holding cost of $45 per unit. Each order placed costs $150. The company operates 300 days per year and it has found that an order must be placed with the supplier 6 working days before it can expect to receive that order. For this subassembly, find:

(a) the economic order quantity.

(b) the annual holding cost.

(c) the annual ordering cost.

(d) the reorder point.

Answer:

(a) EOQ = 100

(b) annual holding cost = (100/2)(45) = 2250

(c) annual ordering cost = (1500/100)(150) = 2250

(d) ROP = 5(6) = 30 units

Diff:Â Difficult

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER & REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

122) The H.A.L. Computer Store sells a printer for $200. Demand for this is constant during the year, and annual demand is forecasted to be 600 units. The holding cost is $20 per unit per year, while the cost of ordering is $60 per order. Currently, the company is ordering 12 times per year (50 units each time). There are 250 working days per year and the lead-time is 10 days.

(a) Given the current policy of ordering 50 units at a time, what is the total of the annual ordering cost and the annual holding cost?

(b) If the company used the absolute best inventory policy, what would the total of the ordering and holding cost be?

(c) What is the reorder point?

Answer:

(a) TOC + THC = 720 + 500 = $1220

(b) If they order EOQ = 60 units, TOC + THC = 600 + 600 = $1,200

(c) ROP = (600/250)10 = 24 units

Diff:Â Difficult

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER & REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

123) Purinnerds Dog Food is a very popular product at Kay Gnein’s corner grocery. Demand for this is relatively constant, and the total demand for the year is 1,200 bags. The cost of placing an order is $50, while the holding cost is $3 per unit per year. The store is open 300 days per year. Lead-time for this is 8 days.

(a) If Kay places 50 orders per year, what would her annual ordering and holding costs be?

(b) If Kay wishes to minimize her total inventory cost, how many units should she order each time an order is placed?

(c) What is the reorder point?

Answer:

(a) With 50 orders per year, Q = 24. TC = TOC + THC = 2500 + 36 = $2,536

(b) EOQ = 200

(c) ROP = (1200/300)8 = 32 units

Diff:Â Difficult

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order; LO 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

124) A company uses 2,750 per year of a certain subassembly that has a purchase cost of $450, and an annual holding cost of $500 per unit. Each order placed costs $150. The company operates 300 days per year and it has found that an order must be placed with the supplier 12 working days before it can expect to receive that order. For this subassembly, find:

(a) the economic order quantity.

(b) the reorder point.

Answer:

(a) [2(2750)(150)/500]1/2Â = 40.6 units

(b) (2750/300)(12) = 110 units

Diff:Â Moderate

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order; LO 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

125) The H.A.L. Computer Store sells a printer for $400. Demand for this is constant during the year, and annual demand is forecasted to be 1350 units. The holding cost is $20 per unit per year, while the cost of ordering is $90 per order. Currently, the company is ordering 12 times per year (92 units each time). There are 270 working days per year and the lead-time is 8 days. What should be the reorder point?

Answer:Â (1350/270)(8) = 40 units

Diff:Â Moderate

Topic:Â REORDER POINT: DETERMINING WHEN TO ORDER

LO:Â 6.4: Compute the reorder point (ROP) in determining when to order more inventory.

AACSB:Â Analytical thinking

Classification:Â Application

126) The Handy Manufacturing Company manufactures small air conditioner compressors. The estimated demand for the year is 12,000 units. The setup cost for the production process is $200 per run, and the carrying cost is $10.00 per unit per year. The daily production rate is 100 units per day, and demand has been 50 units per day. Determine the number of units to produce in each batch. (The problem assumes 240 operating days.)

Answer:Â Optimum production quantity = {[2(12,000)(200)]/[10(1 âˆ’ 50/100)]}1/2Â = 979.8 units

Diff:Â Moderate

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Application

127) Anne Beck recently took over a beauty supply store. Her predecessor always ordered shampoo in quantities of 100 units. Anne is reevaluating this policy. Based on her analysis, the cost to place each order is $35 and the holding cost is $8 per shampoo bottle per year. The annual demand for this product is 2500 bottles. Should Anne change the current order policy and, if so, how much can she save?

Answer:Â Current inventory policy parameters:

D = 2500, Q = 100, # of orders = 25, Average inventory = 50, Order cost = $875,

Holding cost = $400, Total inventory cost = $875 + $400 = $1,275

Optimal inventory policy parameters:

Q* = 147.9, or 148 bottles, # of orders = 16.89, Average inventory = 74, Order cost = $591.15,

Holding cost = $592, Total inventory cost = $591.15 + $592 = $1,183.15

She should change her order policy.

Savings = $1,275 – $1,183.15 = $91.85

Diff:Â Difficult

Topic:Â ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO ORDER

LO:Â 6.3: Use the economic order quantity (EOQ) to determine how much to order.

AACSB:Â Analytical thinking

Classification:Â Application

128) Candy Incorporated stocks bubble gum game cards, an item that has a normally distributed demand during the reorder period with a mean of 12 dozen boxes and a standard deviation of two dozen boxes. If it is desirable to experience a stockout only 10 percent of the time, what is the appropriate safety stock?

Answer:Â For 90 percent service level, the safety stock = 1.28(2) = 2.56 units.

Diff:Â Moderate

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

129) The purchasing manager for a firm is trying to determine what the safety stock should be for a particular product. She has developed the following table, which gives the distribution of demand during the lead-time and the probabilities:

Demand During Lead-Time | Probability |

40 | 0.20 |

50 | 0.25 |

60 | 0.25 |

70 | 0.20 |

80 | 0.10 |

The carrying cost is $5 per unit per year, the ordering cost is $30 per order, and the stockout cost is $40 per unit. The reorder point is 60 units, and 6 orders are placed each year. What level of safety stock should be maintained?

Answer:

Safety Stock | Additional Holding Cost | Stockout Cost | Total Cost |

0 | 0 | (10)(0.2)(40)(10) + (20)(0.1)(40)(10) | 1600 |

10 | 50 | (10)(0.1)(40)(10) | 450 |

20 | 100 | 0 | 100 |

Therefore, 20 units of safety stock should be carried.

Diff:Â Difficult

Topic:Â USE OF SAFETY STOCK

LO:Â 6.7: Understand the use of safety stock.

AACSB:Â Analytical thinking

Classification:Â Application

130) Fresh First grocery store faces demand for freshly squeezed orange juice. The daily demand for freshly squeezed pomegranate juice ranges from 0 to 5 gallons. The grocery store offers the juice in a special 1 gallon bottle that will be discarded after a day. Each gallon costs $2 to make and is sold for $5. The daily demand for pomegranate juice varies according to the following distribution:

x | p(x) |

0 | 0.05 |

1 | 0.2 |

2 | 0.4 |

3 | 0.2 |

4 | 0.1 |

5 | 0.05 |

How many gallons of juice should the store make each day?

Answer:Â Since the rule is P â‰¥ 2/(2 + 3) = 0.4; since P â‰¥ (3) = .35 and P â‰¥ (2) = .75, the store should produce 2 gallons a day.

Diff:Â Moderate

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

131) A professional baseball organization chooses to sell game day programs. Demand for game day programs is normally distributed with a mean of 2,000 and standard deviation of 300. If the marginal loss is $1 and the marginal profit is $3, how many programs should the baseball organization print?

Answer:Â P = ML/(ML + MP) = 0.25. Z = 0.6745. X = 2,000 + 0.6745(300) = 2202.35.

Therefore, the baseball organization should print 2203 programs.

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

132) Demand for local newspapers in King County during weekdays is normally distributed with a mean of 500 and standard deviation of 100. The marginal loss per paper is $0.10 and marginal profit is $0.40. How many newspapers should the local publisher produce each day?

Answer:Â P = ML/(ML + MP) = 0.20. Z = 0.8416. X = 1,000 + 0.8416(100) = 1,084.16.

Therefore, the newspaper organization should print 1085 newspapers.

Diff:Â Difficult

Topic:Â SINGLE-PERIOD INVENTORY MODELS

LO:Â 6.8: Compute single period inventory quantities using marginal analysis.

AACSB:Â Analytical thinking

Classification:Â Application

133) Consider the material structure tree for item A below. Assume 15 units of A are needed.

(a) How many units of B are needed?

(b) How many units of C are needed?

(c) How many units of D are needed?

(d) How many units of E are needed?

Answer:Â (a) 3 * 15 = 45. (b) 4 * 15 = 60. (c) 3 * 3 * 5 + 2 * 4 * 15 = 255. (d) 5 * 3 * 15 + 6 * 4 * 15 = 585.

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification:Â Application

134) Consider the material tree structure for material A. Assume 10 units are needed.

(a) How many units of B are needed?

(b) How many units of C are needed?

(c) How many units of D are needed?

(d) How many units of E are needed?

(e) How many units of F are needed?

Answer:Â (a) 40 (b) 40 (c) 20 (d)120 (e) 80

Diff:Â Moderate

Topic:Â DEPENDENT DEMAND: THE CASE FOR MATERIAL REQUIREMENTS PLANNING

AACSB:Â Analytical thinking

Classification: Â Application

135) What are the five uses of inventory?

Answer:Â 1) The decoupling function 2) Storing resources 3) Irregular supply and demand 4) Quantity discounts and 5) Avoiding stockouts and shortages

Diff:Â Moderate

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

136) Explain the purpose of ABC analysis.

Answer:Â The purpose of ABC analysis is to divide all of a company’s inventory items into three groups (group A, group B, and group C) based on the overall inventory value of the items. A prudent manager should spend more time managing those items representing the greatest dollar inventory cost (A items) because this is where the greatest potential savings are.

Diff:Â Moderate

Topic:Â ABC ANALYSIS

LO:Â 6.9: Understand the importance of ABC analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

137) List three general categories of inventory.

Answer:Â raw material, work-in-process inventory, finished goods inventory

Diff:Â Moderate

Topic:Â INTRODUCTION

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

138) Explain how inventory can act as a buffer in the production process.

Answer:Â Storing some inventory helps to decouple the manufacturing process within the organization.

Diff:Â Moderate

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

139) List several disadvantages of buying inventory in large quantities.

Answer:Â higher storage cost, more spoilage, damaged stock, theft, insurance, less cash to invest

Diff:Â Moderate

Topic:Â IMPORTANCE OF INVENTORY CONTROL

LO:Â 6.1: Understand the importance of inventory control.

AACSB:Â Analytical thinking

Classification:Â Concept

140) What is the purpose of all inventory models?

Answer:Â The purpose of all inventory models and techniques is to determine rationally how much to order and when to order.

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

141) List major carrying cost factors.

Answer:Â cost of capital, taxes, insurance, spoilage, theft, obsolescence, warehouse personnel wages, utilities and building costs for the warehouse, and supplies such as forms and paper for the warehouse

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

142) List major ordering cost factors.

Answer:Â developing and sending purchase orders, processing and inspecting incoming inventory, bill paying, inventory inquiries, and purchasing department expenses and supplies

Diff:Â Moderate

Topic:Â INVENTORY DECISIONS

LO:Â 6.2: Understand the various types of inventory related decisions.

AACSB:Â Analytical thinking

Classification:Â Concept

143) Explain the basic difference(s) between the simple EOQ model and the production run model.

Answer:Â In the simple EOQ, inventory delivery is assumed to occur instantaneously, while in the production run model, inventory is assumed to be produced (or “delivered”) over time.

Diff:Â Moderate

Topic:Â EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO:Â 6.5: Handle inventory problems that allow noninstantaneous receipt.

AACSB:Â Analytical thinking

Classification:Â Concept

144) Discuss why it is sometimes prudent not to order the minimum level required to obtain a quantity discount.

Answer:Â The increased holding cost associated with ordering the minimum level required for the discount may outweigh the savings from the quantity discount.

Diff:Â Moderate

Topic:Â QUANTITY DISCOUNT MODELS

LO:Â 6.6: Handle inventory problems that allow quantity discounts.

AACSB:Â Analytical thinking

Classification:Â Concept

145) How does a kanban system help identify bottlenecks and production problems?

Answer:Â Production bottlenecks and problems can be uncovered by reducing the amount of inventory in the system. Inventory is often used to cover these problems by using it as a buffer between adjacent operations. Many production managers remove containers and their associated P-kanbans from the kanban system in order to “starve” the production line to uncover bottlenecks and potential problems. When the production line stops or is starved for inventory, the problem area is quickly located.

Diff:Â Moderate

Topic:Â JUST-IN-TIME INVENTORY CONTROL

LO:Â 6.11: Discuss just-in-time inventory concepts to reduce inventory levels and costs.

AACSB:Â Analytical thinking

Classification:Â Concept

146) Briefly describe the progression from MRP to ERP systems.

Answer:Â Over the years, MRP has evolved to include not only the materials required in production but also the labor hours, material cost, and other resources related to production. When approached in this fashion, the term *MRP II* is often used, and the word *resource* replaces the word *requirements.* As this concept evolved and sophisticated computer software programs were developed, these systems were called enterprise resource planning (ERP) systems. The objective of an ERP system is to reduce costs by integrating all of the operations of a firm. This starts with the supplier of the materials needed and flows through the organization to include invoicing the customer for the final product. Data are entered once into a database, and then these data can be quickly and easily accessed by anyone in the organization.

Diff:Â Moderate

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

147) What are the potential benefits and detriments of an ERP implementation?

Answer:Â The benefits of a well-developed ERP system are reduced transaction costs and increased speed and accuracy of information. However, there are drawbacks as well. The software is expensive to buy and costly to customize. The implementation of an ERP system may require a company to change its normal operations, and employees are often resistant to change. Also, training employees on the use of the new software can be expensive.

Diff:Â Moderate

Topic:Â ENTERPRISE RESOURCE PLANNING

LO:Â 6.12: Discuss enterprise resource planning systems.

AACSB:Â Analytical thinking

Classification:Â Concept

*Quantitative Analysis for Management, 13e*** (Render et al.)**

**Chapter 7Â Linear Programming Models: Graphical and Computer Methods**

**Â **

1) Management resources that need control include machinery usage, labor volume, money spent, time used, warehouse space used, and material usage.

Answer:Â TRUE

Diff:Â Easy

Topic:Â INTRODUCTION

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

2) In the term *linear programming*, the word programming comes from the phrase “computer programming.”

Answer:Â FALSE

Diff:Â Moderate

Topic:Â INTRODUCTION

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

3) One of the assumptions of LP is “simultaneity.”

Answer:Â FALSE

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

4) Any linear programming problem can be solved using the graphical solution procedure.

Answer:Â FALSE

Diff:Â Easy

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

LO:Â 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods.

AACSB:Â Analytical thinking

Classification:Â Concept

5) An LP formulation typically requires finding the maximum value of an objective while simultaneously maximizing usage of the resource constraints.

Answer:Â FALSE

Diff: Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Concept

6) There are no limitations on the number of constraints or variables that can be graphed to solve an LP problem.

Answer:Â FALSE

Diff:Â Easy

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

LO:Â 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods.

AACSB:Â Analytical thinking

Classification:Â Concept

7) Resource restrictions are called constraints.

Answer:Â TRUE

Diff:Â Easy

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

8) One of the assumptions of LP is “proportionality.”

Answer:Â TRUE

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

9) The set of solution points that satisfies all of a linear programming problem’s constraints simultaneously is defined as the feasible region in graphical linear programming.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

LO:Â 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods.

AACSB:Â Analytical thinking

Classification:Â Concept

10) An objective function is necessary in a maximization problem but is not required in a minimization problem.

Answer:Â FALSE

Diff:Â Easy

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

11) In some instances, an infeasible solution may be the optimum found by the corner point method.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

12) The rationality assumption implies that solutions need not be in whole numbers (integers).

Answer:Â FALSE

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

13) The solution to a linear programming problem must always lie on a constraint.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

14) In a linear program, the constraints must be linear, but the objective function may be nonlinear.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

15) Resource mix problems use LP to decide how much of each product to make, given a series of resource restrictions.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Concept

16) The existence of non-negativity constraints in a two-variable linear program implies that we are always working in the northwest quadrant of a graph.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

17) The shadow price is the same as the dual price in maximization problems.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

18) The term *slack* is associated with â‰¥ constraints.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

19) The term *surplus* is associated with â‰¥ constraints.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

20) Any time that we have an isoprofit line that is parallel to a constraint, we have the possibility of multiple solutions.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

LO:Â 7.6: Understand special issues in LP such as infeasibility, unboundedness, redundancy, and alternative optimal solutions.

AACSB:Â Analytical thinking

Classification:Â Concept

21) If the isoprofit line is not parallel to a constraint, then the solution must be unique.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

LO:Â 7.6: Understand special issues in LP such as infeasibility, unboundedness, redundancy, and alternative optimal solutions.

AACSB:Â Analytical thinking

Classification:Â Concept

22) When two or more constraints conflict with one another, we have a condition called unboundedness.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

LO:Â 7.6: Understand special issues in LP such as infeasibility, unboundedness, redundancy, and alternative optimal solutions.

AACSB:Â Analytical thinking

Classification:Â Concept

23) The addition of a redundant constraint lowers the isoprofit line.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

24) Sensitivity analysis enables us to look at the effects of changing the coefficients in the objective function, one at a time.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

25) In a minimization problem, the isocost line is used rather than an isoprofit line.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â SOLVING MINIMIZATION PROBLEMS

LO:Â 7.5: Understand the difference between minimization and maximization objective functions.

AACSB:Â Analytical thinking

Classification:Â Concept

26) Unlike a maximization problem, a two-variable minimization problem may not be solved graphically.

Answer:Â FALSE

Diff:Â Easy

Topic:Â SOLVING MINIMIZATION PROBLEMS

LO:Â 7.5: Understand the difference between minimization and maximization objective functions.

AACSB:Â Analytical thinking

Classification:Â Concept

27) In a minimization problem, the isocost line slides down and to the left through a feasible region to reflect decreasing costs.

Answer:Â TRUE

Diff:Â Moderate

Topic:Â SOLVING MINIMIZATION PROBLEMS

LO:Â 7.5: Understand the difference between minimization and maximization objective functions.

AACSB:Â Analytical thinking

Classification:Â Concept

28) When using Solver to find a solution for an LP problem, both the left-hand side and the right-hand side of your constraints must be a formula calculated using the cells containing the decision variables.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â SOLVING FLAIR FURNITURE’S LP PROBLEM USING QM FOR WINDOWS AND EXCEL 2016 AND EXCEL QM

LO:Â 7.4: Use Excel spreadsheets to solve LP problems.

AACSB:Â Analytical thinking

Classification:Â Concept

29) If you enter inequalities such as “â‰¤” directly into your Excel spreadsheet, you do not need to designate them when defining constraints using Solver.

Answer:Â FALSE

Diff:Â Moderate

Topic:Â SOLVING FLAIR FURNITURE’S LP PROBLEM USING QM FOR WINDOWS AND EXCEL 2016 AND EXCEL QM

LO:Â 7.4: Use Excel spreadsheets to solve LP problems.

AACSB:Â Analytical thinking

Classification:Â Concept

30) Constraints do not need to be entered one at a time when using Solver.

Answer:Â TRUE

Diff:Â Easy

Topic:Â SOLVING FLAIR FURNITURE’S LP PROBLEM USING QM FOR WINDOWS AND EXCEL 2016 AND EXCEL QM

LO:Â 7.4: Use Excel spreadsheets to solve LP problems.

AACSB:Â Analytical thinking

Classification:Â Concept

31) A widely used mathematical programming technique designed to help managers and decision making relative to resource allocation is called

- A) linear programming.
- B) computer programming.
- C) constraint programming.
- D) goal programming.

Answer:Â A

Diff:Â Easy

Topic:Â INTRODUCTION

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

32) Which of the following is __not__ a property of all linear programming problems?

- A) the presence of restrictions
- B) optimization of some objective
- C) a computer program
- D) alternate courses of action to choose from

Answer:Â C

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

33) A feasible solution to a linear programming problem

- A) must be a corner point of the feasible region.
- B) must satisfy all of the problem’s constraints simultaneously.
- C) need not satisfy all of the constraints, only the non-negativity constraints.
- D) must give the maximum possible profit.

Answer:Â B

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

34) Infeasibility in a linear programming problem occurs when

- A) a constraint is redundant.
- B) more than one solution is optimal.
- C) the feasible region is unbounded.
- D) there is no solution that satisfies all the constraints given.

Answer:Â D

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

35) In a maximization problem, when one or more of the solution variables and the profit can be made infinitely large without violating any constraints, the linear program has

- A) an infeasible solution.
- B) an unbounded solution.
- C) a redundant constraint.
- D) alternate optimal solutions.

Answer:Â B

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

36) Which of the following is __not__ a part of every linear programming problem formulation?

- A) an objective function
- B) a set of constraints
- C) non-negativity constraints
- D) a redundant constraint

Answer:Â D

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

37) When appropriate, the optimal solution to a maximization linear programming problem can be found by graphing the feasible region and

- A) finding the profit at every corner point of the feasible region to see which one gives the highest value.
- B) moving the isoprofit lines towards the origin in a parallel fashion until the last point in the feasible region is encountered.
- C) locating the point that is highest on the graph.
- D) sliding the constraints to find the greatest point of intersection.

Answer:Â A

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

38) The mathematical theory behind linear programming states that an optimal solution to any problem will lie at a(n) ________ of the feasible region.

- A) interior point or center
- B) maximum point or minimum point
- C) corner point or extreme point
- D) interior point or extreme point

Answer:Â C

Diff:Â Easy

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

39) Which of the following is __not__ a property of linear programs?

- A) one objective function
- B) at least two separate feasible regions
- C) alternative courses of action
- D) one or more constraints

Answer:Â B

Diff:Â Easy

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

40) The corner point solution method

- A) will always provide one, and only one, optimum.
- B) will yield different results from the isoprofit line solution method.
- C) requires that the profit from all corners of the feasible region be compared.
- D) requires that all corners created by all constraints be compared.

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

41) When a constraint line bounding a feasible region has the same slope as an isoprofit line

- A) there may be more than one optimum solution.
- B) the problem involves redundancy.
- C) an error has been made in the problem formulation.
- D) a condition of infeasibility exists.

Answer:Â A

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

42) The simultaneous equation method is

- A) an alternative to the corner point method.
- B) useful only in minimization methods.
- C) an algebraic means for solving the intersection of two or more constraint equations.
- D) useful only when more than two product variables exist in a product mix problem.

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

43) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 12X + 10Y

Subject to:Â Â Â Â Â Â 4X + 3Y â‰¤ 480

2X + 3Y â‰¤ 360

all variable â‰¥ 0

The maximum possible value for the objective function is

- A) 360.
- B) 480.
- C) 1520.
- D) 1560.

Answer:Â C

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

44) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 4X + 10Y

Subject to:Â Â Â Â Â Â 3X + 4Y â‰¤ 480

4X + 2Y â‰¤ 360

all variable â‰¥ 0

The feasible corner points are (48,84), (0,120), (0,0), (90,0). What is the maximum possible value for the objective function?

- A) 1032
- B) 1200
- C) 360
- D) 1600

Answer:Â B

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

45) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 5X + 6Y

Subject to:Â Â Â Â Â Â 4X + 2Y â‰¤ 420

1X + 2Y â‰¤ 120

all variable â‰¥ 0

Which of the following points (X,Y) is not a feasible corner point?

- A) (0,60)
- B) (105,0)
- C) (120,0)
- D) (100,10)

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

46) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 5X + 6Y

Subject to:Â Â Â Â Â Â 4X + 2Y â‰¤ 420

1X + 2Y â‰¤ 120

all variable â‰¥ 0

Which of the following points (X,Y) is not feasible?

- A) (50,40)
- B) (20,50)
- C) (60,30)
- D) (90,10)

Answer:Â A

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

47) Two models of a product â€” Regular (X) and Deluxe (Y) â€” are produced by a company. A linear programming model is used to determine the production schedule. The formulation is as follows:

Maximize profit =Â Â Â 50X + 60Y

Subject to:Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 8X + 10Y â‰¤ 800 (labor hours)

X + Y â‰¤ 120Â Â Â Â Â Â (total units demanded)

4X + 5Y â‰¤ 500Â Â (raw materials)

all variable â‰¥ 0

The optimal solution is X = 100, Y = 0.

How many units of the regular model would be produced based on this solution?

- A) 0
- B) 100
- C) 50
- D) 120

Answer:Â B

Diff:Â Easy

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

48) Two models of a product â€” Regular (X) and Deluxe (Y) â€” are produced by a company. A linear programming model is used to determine the production schedule. The formulation is as follows:

Maximize profit =Â Â Â 50X + 60Y

Subject to:Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â 8X + 10Y â‰¤ 800 (labor hours)

X + Y â‰¤ 120Â Â Â Â Â Â (total units demanded)

4X + 5Y â‰¤ 500Â Â (raw materials)

all variable â‰¥ 0

The optimal solution is X = 100, Y = 0.

Which of these constraints is redundant?

- A) the first constraint
- B) the second constraint
- C) the third constraint
- D) the fourth constraint

Answer:Â B

Diff:Â Difficult

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Application

49) Consider the following linear programming problem:

MinimizeÂ Â Â Â Â Â Â Â 20X + 30Y

Subject to:Â Â Â Â Â Â 2X + 4Y â‰¤ 800

6X + 3Y â‰¥ 300

X, Y â‰¥ 0

What is the optimum solution to this problem (X,Y)?

- A) (0,0)
- B) (50,0)
- C) (0,100)
- D) (400,0)

Answer:Â B

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

50) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 20X + 30Y

Subject to:Â Â Â Â Â Â X + Y â‰¤ 80

8X + 9Y â‰¤ 600

3X + 2Y â‰¥ 400

X, Y â‰¥ 0

This is a special case of a linear programming problem in which

- A) there is no feasible solution.
- B) there is a redundant constraint.
- C) there are multiple optimal solutions.
- D) this cannot be solved graphically.

Answer:Â A

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

51) Which of the following is __not__ acceptable as a constraint in a linear programming problem (maximization)?

Constraint 1Â Â Â X + XY + Y â‰¥ 12

Constraint 2Â Â Â X – 2Y â‰¤ 20

Constraint 3Â Â Â X + 3Y = 48

Constraint 4Â Â Â X + Y + Z â‰¤ 150

- A) Constraint 1
- B) Constraint 2
- C) Constraint 3
- D) Constraint 4

Answer:Â A

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Application

52) If one changes the contribution rates in the objective function of an LP

- A) the feasible region will change.
- B) the slope of the isoprofit or isocost line will change.
- C) the optimal solution to the LP is sure to no longer be optimal.
- D) the problem will no longer be linear.

Answer:Â B

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

53) Sensitivity analysis may also be called

- A) postoptimality analysis.
- B) nonparametric programming.
- C) preoptimality analysis.
- D) redundancy testing

Answer:Â A

Diff:Â Moderate

Topic: Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

54) Sensitivity analyses are used to examine the effects of changes in

- A) contribution rates for each variable.
- B) degree space.
- C) the modeler.
- D) the degrees of freedom in the numerator

Answer:Â A

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

55) Which of the following is a basic assumption of linear programming?

- A) The condition of uncertainty exists.
- B) Independence exists for the activities.
- C) Proportionality exists in the objective function and constraints.
- D) Divisibility does not exist, allowing only integer solutions.

Answer:Â C

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

56) If the addition of a constraint to a linear programming problem does not change the solution, the constraint is said to be

- A) unbounded.
- B) non-negative.
- C) infeasible.
- D) redundant.

Answer:Â D

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

57) Which of the following is __not__ an assumption of LP?

- A) simultaneity
- B) certainty
- C) proportionality
- D) divisibility

Answer:Â A

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

58) The difference between the left-hand side and right-hand side of a less-than-or-equal-to constraint is referred to as

- A) surplus.
- B) constraint.
- C) slack.
- D) shadow price.

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

59) The difference between the left-hand side and right-hand side of a greater-than-or-equal-to constraint is referred to as

- A) surplus.
- B) constraint.
- C) slack.
- D) shadow price.

Answer:Â A

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

60) A constraint with zero slack or surplus is called a

- A) nonbinding constraint.
- B) resource constraint.
- C) binding constraint.
- D) nonlinear constraint.

Answer:Â C

Diff:Â Easy

Topic:Â SOLVING FLAIR FURNITURE’S LP PROBLEM USING QM FOR WINDOWS AND EXCEL 2016 AND EXCEL QM

LO:Â 7.4: Use Excel spreadsheets to solve LP problems.

AACSB:Â Analytical thinking

Classification:Â Concept

61) The coefficients of the variables in the constraint equations that represent the amount of resources needed to produce one unit of the variable are called

- A) technological coefficients.
- B) objective coefficients.
- C) shadow prices.
- D) dual prices.

Answer:Â A

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

62) A constraint with positive slack or surplus is called a

- A) nonbinding constraint.
- B) resource constraint.
- C) binding constraint.
- D) nonlinear constraint.

Answer:Â A

Diff:Â Easy

Topic:Â SOLVING FLAIR FURNITURE’S LP PROBLEM USING QM FOR WINDOWS AND EXCEL 2016 AND EXCEL QM

LO:Â 7.4: Use Excel spreadsheets to solve LP problems.

AACSB:Â Analytical thinking

Classification:Â Concept

63) A straight line representing all non-negative combinations of *X*1Â and *X*2Â for a particular profit level is called a(n)

- A) objective line.
- B) sensitivity line.
- C) profit line.
- D) isoprofit line.

Answer:Â D

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

64) In order for a linear programming problem to have a unique solution, the solution must exist

- A) at the intersection of the non-negativity constraints.
- B) at the intersection of a non-negativity constraint and a resource constraint.
- C) at the intersection of the objective function and a constraint.
- D) at the intersection of two or more constraints.

Answer:Â D

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Concept

65) In order for a linear programming problem to have multiple solutions, the solution must exist

- A) at the intersection of the non-negativity constraints.
- B) on a non-redundant constraint parallel to the objective function.
- C) at the intersection of the objective function and a constraint.
- D) at the intersection of three or more constraints.

Answer:Â B

Diff:Â Moderate

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

66) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 12X + 10Y

Subject to:Â Â Â Â Â Â 4X + 3Y â‰¤ 480

2X + 3Y â‰¤ 360

all variables â‰¥ 0

Which of the following points (X,Y) is feasible?

- A) (10,120)
- B) (120,10)
- C) (30,100)
- D) (60,90)

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

67) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 5X + 6Y

Subject to:Â Â Â Â Â Â 4X + 2Y â‰¤ 420

1X + 2Y â‰¤ 120

all variables â‰¥ 0

Which of the following points (X,Y) is in the feasible region?

- A) (30,60)
- B) (105,5)
- C) (0,210)
- D) (100,10)

Answer:Â D

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

68) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 5X + 6Y

Subject to:Â Â Â Â Â Â 4X + 2Y â‰¤ 420

1X + 2Y â‰¤ 120

all variables â‰¥ 0

Which of the following points (X,Y) is feasible?

- A) (50,40)
- B) (30,50)
- C) (60,30)
- D) (90,20)

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

69) Which of the following is __not__ an assumption of LP?

- A) certainty
- B) proportionality
- C) divisibility
- D) multiplicativity

Answer:Â D

Diff:Â Moderate

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Concept

70) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 20X + 30Y

Subject to:Â Â Â Â Â Â X + Y â‰¤ 80

12X + 12Y â‰¤ 600

3X + 2Y â‰¤ 400

X, Y â‰¥ 0

This is a special case of a linear programming problem in which

- A) there is no feasible solution.
- B) there is a redundant constraint.
- C) there are multiple optimal solutions.
- D) this cannot be solved graphically.

Answer:Â B

Diff:Â Difficult

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Concept

71) Which of the following functions is __not__ linear?

- A) 5X + 3Z
- B) 3X + 4Y + Z – 3
- C) 2X + 5YZ
- D) Z

Answer:Â C

Diff:Â Easy

Topic:Â REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM

LO:Â 7.1: Identify the basic assumptions and properties of linear programming (LP).

AACSB:Â Analytical thinking

Classification:Â Application

72) Which of the following is __not__ one of the steps in formulating a linear program?

- A) Graph the constraints to determine the feasible region.
- B) Define the decision variables.
- C) Use the decision variables to write mathematical expressions for the objective function and the constraints.
- D) Identify the objective and the constraints.

Answer:Â A

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Concept

73) What type of problems use LP to decide how much of each product to make, given a series of resource restrictions?

- A) resource mix
- B) product restriction
- C) resource allocation
- D) product mix

Answer:Â D

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Concept

Consider the sensitivity report below for the problems which follow.

74) The optimal solution to this linear program is

- A) x1 = 34, x2 = 40.
- B) x1 = 6, x2 = 11.
- C) x1 = 7.33, x2 = 6.
- D) x1 = 3, x2 = 6.

Answer:Â D

Diff:Â Easy

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

75) Which of the following constraints are binding?

- A) Extrusion only
- B) Packing only
- C) Additive only
- D) Extrusion and Packaging

Answer:Â D

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Concept

76) What is the increase in the objective value if 2 units of extrusion are added?

- A) 3
- B) 6
- C) 48
- D) 96

Answer:Â B

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

77) What is the increase in the objective value if 2 units of packaging are added?

- A) 11
- B) 18
- C) 22
- D) 36

Answer:Â C

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

78) What is the increase in the objective value if 2 units of additive are added?

- A) 0
- B) 4
- C) 12
- D) 16

Answer:Â A

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

79) Consider the following linear programming problem:

MaximizeÂ Â Â Â Â Â Â 10X + 30Y

Subject to:Â Â Â Â Â Â X + 2Y â‰¤ 80

8X + 16Y â‰¤ 640

4X + 2Y â‰¥ 100

X, Y â‰¥ 0

This is a special case of a linear programming problem in which

- A) there is no feasible solution.
- B) there is a redundant constraint.
- C) there are multiple optimal solutions.
- D) this cannot be solved graphically.

Answer:Â B

Diff:Â Difficult

Topic:Â FOUR SPECIAL CASES IN LP

AACSB:Â Analytical thinking

Classification:Â Application

80) Consider the following constraints from a linear programming problem:

2X + Y â‰¤ 200

X + 2Y â‰¤ 200

X, Y â‰¥ 0

If these are the only constraints, which of the following points (X,Y) __cannot__ be the optimal solution?

- A) (0, 0)
- B) (0, 200)
- C) (0,100)
- D) (100, 0)

Answer:Â B

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

81) Consider the following constraints from a linear programming problem:

2X + Y â‰¤ 200

X + 2Y â‰¤ 200

X, Y â‰¥ 0

If these are the only constraints, which of the following points (X,Y) __cannot__ be the optimal solution?

- A) (0, 0)
- B) (0, 100)
- C) (65, 65)
- D) (100, 0)

Answer:Â C

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

82) Classic New Orleans desserts include pralines, pecan pie and Bananas Foster â€” all three are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A pecan pie takes two cups of pecans, a cup of brown sugar, a cup of cane syrup, a cup of granulated sugar, a teaspoon of vanilla, and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen and a pecan pie costs $22.40. Which of these is an appropriate objective function?

- A) Max Z = $7.5BF + $11.34Pr + $11.20Pe
- B) Max Z = $15BF + $22.68Pr 9 $22.40Pe
- C) Max Z = $7.5BF + $22.68Pr + $22.40Pe
- D) Max Z = $15BF + $11.34Pr + $11.20Pe

Answer:Â B

Diff:Â Moderate

Topic: Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

83) Classic New Orleans desserts include pralines, pecan pie and Bananas Foster â€” all three are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A pecan pie takes two cups of pecans, a cup of brown sugar, a cup of cane syrup, a cup of granulated sugar, a teaspoon of vanilla, and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen and a pecan pie costs $22.40. Which of these is an appropriate constraint?

- A) 1Pr + 2Pe + 1BF â‰¤ 24
- B) 1Pr + 2Pe + 1BF â‰¤ 40
- C) Pe â‰¤ 24
- D) 1BF â‰¤ 40

Answer:Â A

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

84) Classic New Orleans desserts include pralines, pecan pie and Bananas Foster â€” all three are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A pecan pie takes two cups of pecans, a cup of brown sugar, a cup of cane syrup, a cup of granulated sugar, a teaspoon of vanilla, and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen and a pecan pie costs $22.40. Which of these is an appropriate constraint?

- A) 1Pr + 2Pe + 1BF â‰¤ 40
- B) 2Pr + 1Pe + 1BF â‰¤ 24
- C) Pe â‰¤ 12
- D) 1BF â‰¤ 40

Answer:Â C

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO: Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

85) Classic New Orleans desserts include pralines, pecan pie and Bananas Foster â€” all three are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A pecan pie takes two cups of pecans, a cup of brown sugar, a cup of cane syrup, a cup of granulated sugar, a teaspoon of vanilla, and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen and a pecan pie costs $22.40. Which of these is an appropriate constraint?

- A) 1Pr + 2Pe + 1BF â‰¤ 40
- B) 2Pr + 1Pe + 1BF â‰¤ 24
- C) Pe â‰¥ 12
- D) BF â‰¥ 0

Answer:Â D

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

86) Classic New Orleans desserts include pralines and Bananas Foster â€” both are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen. Your first constraint for a graphical solution has been plotted. Which constraint is it?

- A) the Praline constraint
- B) the Bananas Foster constraint
- C) the pecan constraint
- D) the brown sugar constraint

Answer:Â D

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

87) Classic New Orleans desserts include pralines and Bananas Foster â€” both are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen. Your first constraint for a graphical solution has been plotted. Which constraint is it?

- A) the Praline constraint
- B) the Bananas Foster constraint
- C) the pecan constraint
- D) the brown sugar constraint

Answer:Â C

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

Classic New Orleans desserts include pralines, pecan pie and Bananas Foster â€” all three are absolutely essential to eat on any trip to the city. Chefs may quibble about this ingredient list as there are dozens of variations on each recipe, but these ingredients are common to most formulations. A recipe for a dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A pecan pie takes two cups of pecans, a cup of brown sugar, a cup of cane syrup, a cup of granulated sugar, a teaspoon of vanilla, and a tablespoon of rum. A recipe for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of granulated sugar, a banana, and a tablespoon of rum and makes two servings. Bananas Foster is considered a dessert for two and is priced accordingly at $15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12 cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla, twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen and a pecan pie costs $22.40. The Sensitivity Report from an Excel formulation of this problem is show below.

88) What is the most you would pay for one more cup of brown sugar?

- A) $0
- B) $0.28
- C) $$0.12
- D) $0.40

Answer:Â B

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

89) What is the most you would pay for one more cup of pecans?

- A) $0
- B) $0.20
- C) $$0.24
- D) $0.40

Answer:Â A

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

90) You don’t use any of the

- A) pecans.
- B) rum.
- C) cane syrup.
- D) vanilla.

Answer:Â C

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

91) You can actually take in $453.60 with this setup. If you had only one more cup of granulated sugar what could your profit be?

- A) $453.60
- B) $454.73
- C) $473.60
- D) $475.72

Answer:Â D

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

92) You can actually take in $453.60 with this setup. Suppose your most important customer comes to you and demands you make her an order of Bananas Foster. What is your profit if you add one recipe of Bananas Foster to your production mix?

- A) $446.20
- B) $453.60
- C) $461.00
- D) $473.60

Answer:Â D

Diff:Â Moderate

Topic:Â SENSITIVITY ANALYSIS

LO:Â 7.7: Understand the role of sensitivity analysis.

AACSB:Â Analytical thinking

Classification:Â Application

93) A furniture company is producing two types of furniture. Product A requires 8 board feet of wood and 2 lbs of wicker. Product B requires 6 board feet of wood and 6 lbs of wicker. There are 2000 board feet of wood available for product and 1000 lbs of wicker. Product A earns a profit margin of $30 a unit and Product B earns a profit margin of $40 a unit. What should the objective function be?

- A) Maximize 30A + 40B
- B) Maximize 10A + 12B
- C) Maximize 14Wood + 8Wicker
- D) Maximize 8A + 2A + 6B + 6B

Answer:Â A

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

94) A furniture company is producing two types of furniture. Product A requires 8 board feet of wood and 2 lbs of wicker. Product B requires 6 board feet of wood and 6 lbs of wicker. There are 2000 board feet of wood available for product and 1000 lbs of wicker. Product A earns a profit margin of $30 a unit and Product B earns a profit margin of $40 a unit. Which of these is an appropriate constraint for Wicker?

- A) 30A + 40B â‰¤ 1000
- B) 10A + 12B â‰¤ 1000
- C) 8A + 2B â‰¤ 1000
- D) 2A + 6B â‰¤ 1000

Answer:Â D

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

95) A furniture company is producing two types of furniture. Product A requires 8 board feet of wood and 2 lbs of wicker. Product B requires 6 board feet of wood and 6 lbs of wicker. There are 2000 board feet of wood available for product and 1000 lbs of wicker. Product A earns a profit margin of $30 a unit and Product B earns a profit margin of $40 a unit. Which of these is an appropriate constraint for Wood?

- A) 30A + 40B â‰¤ 2000
- B) 8A + 6B â‰¤ 2000
- C) 8A + 2B â‰¤ 2000
- D) 2A + 6B â‰¤ 2000

Answer:Â B

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

96) As a supervisor of a production department, you must decide the daily production totals of a certain product that has two models, the Deluxe and the Special. The profit on the Deluxe model is $12 per unit and the Special’s profit is $10. Each model goes through two phases in the production process, and there are only 100 hours available daily at the construction stage and only 80 hours available at the finishing and inspection stage. Each Deluxe model requires 20 minutes of construction time and 10 minutes of finishing and inspection time. Each Special model requires 15 minutes of construction time and 15 minutes of finishing and inspection time. The company has also decided that the Special model must comprise at least 40 percent of the production total. What is an appropriate objective function?

- A) Maximize 2D + 2.5S
- B) Maximize 12D + 10S
- C) Maximize 4D + 2.5S
- D) Maximize 100D + 80S

Answer:Â B

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

97) As a supervisor of a production department, you must decide the daily production totals of a certain product that has two models, the Deluxe and the Special. The profit on the Deluxe model is $12 per unit and the Special’s profit is $10. Each model goes through two phases in the production process, and there are only 100 hours available daily at the construction stage and only 80 hours available at the finishing and inspection stage. Each Deluxe model requires 20 minutes of construction time and 10 minutes of finishing and inspection time. Each Special model requires 15 minutes of construction time and 15 minutes of finishing and inspection time. The company has also decided that the Special model must comprise at least 40 percent of the production total. What is an appropriate constraint for the construction time?

- A) 20D + 15S â‰¥ 6000
- B) 20D + 15S â‰¤ 100
- C) 20D + 15S â‰¤ 6000
- D) 20D + 15S â‰¥ 100

Answer:Â C

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

98) As a supervisor of a production department, you must decide the daily production totals of a certain product that has two models, the Deluxe and the Special. The profit on the Deluxe model is $12 per unit and the Special’s profit is $10. Each model goes through two phases in the production process, and there are only 100 hours available daily at the construction stage and only 80 hours available at the finishing and inspection stage. Each Deluxe model requires 20 minutes of construction time and 10 minutes of finishing and inspection time. Each Special model requires 15 minutes of construction time and 15 minutes of finishing and inspection time. The company has also decided that the Special model must comprise at least 40 percent of the production total. What is an appropriate constraint for the finishing time?

- A) 10D + 15S â‰¤ 4800
- B) 10D + 15S â‰¥ 100
- C) 10D + 15S â‰¤ 80
- D) 15D + 10S â‰¥ 100

Answer:Â C

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

99) As a supervisor of a production department, you must decide the daily production totals of a certain product that has two models, the Deluxe and the Special. The profit on the Deluxe model is $12 per unit and the Special’s profit is $10. Each model goes through two phases in the production process, and there are only 100 hours available daily at the construction stage and only 80 hours available at the finishing and inspection stage. Each Deluxe model requires 20 minutes of construction time and 10 minutes of finishing and inspection time. Each Special model requires 15 minutes of construction time and 15 minutes of finishing and inspection time. The company has also decided that the Special model must comprise at least 40 percent of the production total. The optimal product mix should include

- A) 120D’s.
- B) 120S’s.
- C) 200D’s.
- D) 200S’s.

Answer:Â A

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

100) Consider the following linear program.

MaximizeÂ Â Â Â Â Â Â 30X + 10Y

Subject to:Â Â Â Â Â Â 3X + Y â‰¤ 300

X + Y â‰¤ 200

X â‰¤ 100

Y â‰¥ 50

X,Y â‰¥ 0

Which of these is NOT a corner point of the feasible region?

- A) (0,50)
- B) (50,50)
- C) (50,150)
- D) (75,50)

Answer:Â D

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

101) Consider the following linear program:

Maximize Â Â Â Â Â Â 30X + 10Y

Subject to: Â Â Â Â Â 3X + Y â‰¤ 300

X + Y â‰¤ 200

X â‰¤ 100

YÂ â‰¥ 50

X,Y â‰¥ 0

What is the optimal solution?

- A) $3,000
- B) $3,200
- C) $3,400
- D) $3,600

Answer:Â A

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

102) The Greatest Generation Food Company wishes to introduce a new brand of pureed ready-to-eat meals (composed of pureed chicken and pureed liver meat products) that meets certain nutritional requirements. The liver-flavored product contains 1 unit of nutrient A and 2 units of nutrient B, while the chicken-flavored product contains 1 unit of nutrient A and 4 units of nutrient B. According to federal requirements, there must be at least 40 units of nutrient A and 60 units of nutrient B in a package of the new meals. In addition, the company has decided that there can be no more than 15 units of liver-flavored meat product in a package. It costs 1 cent to make a liver-flavored product and 2 cents to make a chicken-flavored product. What is an appropriate objective function for this scenario?

- A) Minimize L + 2C
- B) Maximize L + 2C
- C) Minimize L + C
- D) Maximize L + C

Answer:Â A

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

103) The Greatest Generation Food Company wishes to introduce a new brand of pureed ready-to-eat meals (composed of pureed chicken and pureed liver meat products) that meets certain nutritional requirements. The liver-flavored product contains 1 unit of nutrient A and 2 units of nutrient B, while the chicken-flavored product contains 1 unit of nutrient A and 4 units of nutrient B. According to federal requirements, there must be at least 40 units of nutrient A and 60 units of nutrient B in a package of the new meals. In addition, the company has decided that there can be no more than 15 units of liver-flavored meat product in a package. It costs 1 cent to make a liver-flavored product and 2 cents to make a chicken-flavored product. Are there any redundant constraints in this scenario?

- A) L + C â‰¤ 100
- B) L + 2C â‰¥ 40
- C) Minimize 2L + 4C â‰¥ 60
- D) There are no redundant constraints.

Answer:Â C

Diff:Â Difficult

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

104) The Greatest Generation Food Company wishes to introduce a new brand of pureed ready-to-eat meals (composed of pureed chicken and pureed liver meat products) that meets certain nutritional requirements. The liver-flavored product contains 1 unit of nutrient A and 2 units of nutrient B, while the chicken-flavored product contains 1 unit of nutrient A and 4 units of nutrient B. According to federal requirements, there must be at least 40 units of nutrient A and 60 units of nutrient B in a package of the new meals. In addition, the company has decided that there can be no more than 15 units of liver-flavored meat product in a package. It costs 1 cent to make a liver-flavored product and 2 cents to make a chicken-flavored product. What is the minimum cost?

- A) 65 cents
- B) 70 cents
- C) 75 cents
- D) 80 cents

Answer:Â A

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

105) The Greatest Generation Food Company wishes to introduce a new brand of pureed ready-to-eat meals (composed of pureed chicken and pureed liver meat products) that meets certain nutritional requirements. The liver-flavored product contains 1 unit of nutrient A and 2 units of nutrient B, while the chicken-flavored product contains 1 unit of nutrient A and 4 units of nutrient B. According to federal requirements, there must be at least 40 units of nutrient A and 60 units of nutrient B in a package of the new meals. In addition, the company has decided that there can be no more than 15 units of liver-flavored meat product in a package. It costs 1 cent to make a liver-flavored product and 2 cents to make a chicken-flavored product. At what point does the optimal solution exist?

- A) (30,0)
- B) (0,40)
- C) (15,25)
- D) (0,0)

Answer:Â C

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

106) A furniture company is producing two types of furniture. Product A requires 8 board feet of wood and 2 lbs of wicker. Product B requires 6 board feet of wood and 6 lbs of wicker. There are 2000 board feet of wood available for product and 1000 lbs of wicker. Product A earns a profit margin of $30 a unit and Product B earns a profit margin of $40 a unit. Formulate the problem as a linear program.

Answer:Â LetÂ Â X1Â = number of units of Product A

X2Â = number of units of Product B

MaximizeÂ Â Â Â Â Â Â 30X1Â + 40X2

Subject to:Â Â Â Â Â Â 8X1Â + 6X2Â â‰¤ 2000

2X1Â + 6X2Â â‰¤ 1000

X1, X2Â â‰¥ 0

Diff:Â Moderate

Topic:Â FORMULATING LP PROBLEMS

LO:Â 7.2: Formulate a linear programming problem algebraically.

AACSB:Â Analytical thinking

Classification:Â Application

107) As a supervisor of a production department, you must decide the daily production totals of a certain product that has two models, the Deluxe and the Special. The profit on the Deluxe model is $12 per unit and the Special’s profit is $10. Each model goes through two phases in the production process, and there are only 100 hours available daily at the construction stage and only 80 hours available at the finishing and inspection stage. Each Deluxe model requires 20 minutes of construction time and 10 minutes of finishing and inspection time. Each Special model requires 15 minutes of construction time and 15 minutes of finishing and inspection time. The company has also decided that the Special model must comprise at least 40 percent of the production total.

(a) Formulate this as a linear programming problem.

(b) Find the solution that gives the maximum profit.

Answer:

(a) Let X1Â = number of Deluxe models

X2Â = number of Special models

MaximizeÂ Â Â Â Â Â Â 12X1Â + 10X2

Subject to:Â Â Â Â Â Â 1/3 X1Â + 1/4 X2Â â‰¤ 100

1/6 X1Â + 1/4 X2Â â‰¤ 80

-0.4X1Â + 0.6X2Â â‰¥ 0

X1, X2Â â‰¥ 0

(b) Optimal solution: X1 = 120, X2 = 240 Profit = $3,840

Diff:Â Difficult

Topic:Â FORMULATING LP PROBLEMS and GRAPHICAL SOLUTION TO AN LP PROBLEM

LO:Â 7.2: Formulate a linear programming problem algebraically; LO 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods.

AACSB:Â Analytical thinking

Classification:Â Application

108) The Fido Dog Food Company wishes to introduce a new brand of dog biscuits (composed of chicken and liver-flavored biscuits) that meets certain nutritional requirements. The liver-flavored biscuits contain 1 unit of nutrient A and 2 units of nutrient B, while the chicken-flavored ones contain 1 unit of nutrient A and 4 units of nutrient B. According to federal requirements, there must be at least 40 units of nutrient A and 60 units of nutrient B in a package of the new biscuit mix. In addition, the company has decided that there can be no more than 15 liver-flavored biscuits in a package. If it costs 1 cent to make a liver-flavored biscuit and 2 cents to make a chicken-flavored one, what is the optimal product mix for a package of the biscuits in order to minimize the firm’s cost?

(a) Formulate this as a linear programming problem.

(b) Find the optimal solution for this problem graphically.

(c) Are any constraints redundant? If so, which one or ones?

(d) What is the total cost of a package of dog biscuits using the optimal mix?

Answer:

(a) Let X1Â = number of liver-flavored biscuits in a package

X2Â = number of chicken-flavored biscuits in a package

MinimizeÂ Â Â Â Â Â Â Â X1Â + 2X2

Subject to:Â Â Â Â Â Â X1Â + X2Â â‰¥ 40

2X1Â + 4X2Â â‰¥ 60

X1Â â‰¤ 15

X1, X2Â â‰¥ 0

(b) Corner points (0,40) and (15,25)

Optimal solution is (15,25) with cost of 65.

(c) 2X1 + 4X2 â‰¥ 60 is redundant.

(d) minimum cost = 65 cents

Diff:Â Difficult

Topic:Â FORMULATING LP PROBLEMS and GRAPHICAL SOLUTION TO AN LP PROBLEM

LO:Â 7.2: Formulate a linear programming problem algebraically; LO 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods.

AACSB:Â Analytical thinking

Classification:Â Application

109) Consider the following linear program:

Maximize Â Â Â Â Â Â 30X + 10Y

Subject to: Â Â Â Â Â 3X + Y â‰¤ 300

X + Y â‰¤ 200

X â‰¤ 100

Y â‰¥ 50

X,Y â‰¥ 0

(a) Solve the problem graphically. Is there more than one optimal solution? Explain.

(b) Are there any redundant constraints?

Answer:

(a) Corner points (0,50), (0,200), (50,50), (75,75), (50,150)

Optimum solutions: (75,75) and (50,150). Both yield a profit of $3,000.

(b) The constraint X1 â‰¤ 100 is redundant since 3X1 + X2 â‰¤ 300 also means that X1 cannot exceed 100.

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

110) Solve the following linear programming problem using the corner point method:

MaximizeÂ Â Â Â Â Â Â 10X + 1Y

Subject to:Â Â Â Â Â Â 4X + 3Y â‰¤ 36

2X + 4Y â‰¤ 40

Y â‰¥ 3

X, Y â‰¥ 0

Answer:Â Feasible corner points (X,Y): (0,3) (0,10) (2.4,8.8) (6.75,3)

Maximum profit 70.5 at (6.75,3).

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

111) Solve the following linear programming problem using the corner point method:

MaximizeÂ Â Â Â Â Â Â 3X + 5Y

Subject to:Â Â Â Â Â Â 4X + 4Y â‰¤ 48

1X + 2Y â‰¤ 20

Y â‰¥ 2

X, Y â‰¥ 0

Answer:Â Feasible corner points (X,Y): (0,2) (0,10) (4,8) (10,2)

Maximum profit is 52 at (4,8).

Diff:Â Difficult

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

112) Billy Penny is trying to determine how many units of two types of lawn mowers to produce each day. One of these is the Standard model, while the other is the Deluxe model. The profit per unit on the Standard model is $60, while the profit per unit on the Deluxe model is $40. The Standard model requires 20 minutes of assembly time, while the Deluxe model requires 35 minutes of assembly time. The Standard model requires 10 minutes of inspection time, while the Deluxe model requires 15 minutes of inspection time. The company must fill an order for 6 Deluxe models. There are 450 minutes of assembly time and 180 minutes of inspection time available each day. How many units of each product should be manufactured to maximize profits?

LetÂ Â Â Â Â Â X = number of Standard models to produce

Y = number of Deluxe models to produce

MaximizeÂ Â Â Â Â Â Â 60X + 40Y

Subject to:Â Â Â Â Â Â 20X + 35Y â‰¤ 450

10X + 15Y â‰¤ 180

Y â‰¥ 6

X, Y â‰¥ 0

Answer:Â Maximum profit is $780 by producing 9 Standard and 6 Deluxe models.

Diff:Â Difficult

Topic:Â FORMULATING LP PROBLEMS and GRAPHICAL SOLUTION TO AN LP PROBLEM

LO:Â 7.2: Formulate a linear programming problem algebraically; LO 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods.

AACSB:Â Analytical thinking

Classification:Â Application

113) Two advertising media are being considered for promotion of a product. Radio ads cost $400 each, while newspaper ads cost $600 each. The total budget is $7,200 per week. The total number of ads should be at least 15, with at least 2 of each type. Each newspaper ad reaches 6,000 people, while each radio ad reaches 2,000 people. The company wishes to reach as many people as possible while meeting all the constraints stated. How many ads of each type should be placed?

Answer:Â LetÂ Â R = number of radio ads placed

N = number of newspaper ads placed

MaximizeÂ Â Â Â Â Â Â 2000R + 6000N

Subject to:Â Â Â Â Â Â R + N â‰¥ 15

400R + 600N â‰¤ 7200

R â‰¥ 2

N â‰¥ 2

R, N â‰¥ 0

Feasible corner points (R,N): (9,6) (13,2) (15,2)

Maximum exposure 54,000 with 9 radio and 6 newspaper ads.

Diff:Â Difficult

Topic:Â FORMULATING LP PROBLEMS and GRAPHICAL SOLUTION TO AN LP PROBLEM

AACSB:Â Analytical thinking

Classification:Â Application

114) Suppose a linear programming (minimization) problem has been solved and the optimal value of the objective function is $300. Suppose an additional constraint is added to this problem. Explain how this might affect each of the following:

(a) the feasible region.

(b) the optimal value of the objective function.

Answer:

(a) Adding a new constraint will reduce the size of the feasible region unless it is a redundant constraint. It can never make the feasible region any larger. However, it could make the problem infeasible.

(b) A new constraint can only reduce the size of the feasible region; therefore, the value of the objective function will either increase or remain the same. If the original solution is still feasible, it will remain the optimal solution.

Diff:Â Moderate

Topic:Â GRAPHICAL SOLUTION TO AN LP PROBLEM and FOUR SPECIAL CASES IN LP

LO:Â 7.3: Graphically solve any LP problem that has only two variables by both the corner point and the isoprofit line methods; LO 7.6: Understand special issues in LP such as infeasibility, unboundedness, redundancy, and alternative optimal solutions.

AACSB:Â Analytical thinking

Classification:Â Application