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ECONOMICS FINANCE EXAM STUDY QUESTIONS AND ANSWERS RATED A
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ECONOMICS FINANCE EXAM STUDY QUESTIONS AND ANSWERS RATED A
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ECONOMICS FINANCE EXAM STUDYQUESTIONS AND ANSWERS RATED A.
A product whose EOQ is 40 units experiences a decrease in ordering cost
from $90 per order to $10 per order. The revised EOQ is:
A) three times as large.
B) one-third as large.
C) nine times as large.
D) one-ninth as large.
E) cannot be determined
Correct Answer -B
A product whose EOQ is 400 units experiences a 50% increase in demand.
The new EOQ is:
A) unchanged.
B) increased by less than 50%.
C) increased by 50%.
D) increased by more than 50%.
E) cannot be determined
Correct Answer -B
For a certain item, the cost-minimizing order quantity obtained with the
basic EOQ model is 200 units, and the total annual inventory (carrying and
setup) cost is $600. What is the inventory carrying cost per unit per year for
this item?
,A) $1.50
B) $2.00
C) $3.00
D) $150.00
E) not enough data to determine
Correct Answer -C
A product has a demand of 4000 units per year. Ordering cost is $20, and
holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-
minimizing solution for this product will cost ________ per year in total
annual inventory (holding and setup) costs.
A) $400
B) $800
C) $1200
D) Zero; this is a class C item.
E) Cannot be determined because the unit price is not known.
Correct Answer -B
A product has a demand of 4000 units per year. Ordering cost is $20, and
holding cost is $4 per unit per year. The cost-minimizing solution for this
product is to order:
A) all 4000 units at one time.
B) 200 units per order.
C) every 20 days.
D) 10 times per year.
, E) none of the above
Correct Answer -B
Which of the following statements regarding the reorder point is TRUE?
A) The reorder point is that quantity that triggers an action to restock an
item.
B) There is a reorder point even if lead time and demand during lead time are
constant.
C) The reorder point is larger than d × L if safety stock is present.
D) A shorter lead time implies a smaller reorder point.
E) All of the above are true.
Correct Answer -E
An inventory decision rule states, "When the inventory level goes down to
14 gearboxes, 100 gearboxes will be ordered." Which of the following
statements is TRUE?
A) One hundred is the reorder point, and 14 is the order quantity.
B) Fourteen is the reorder point, and 100 is the order quantity.
C) The number 100 is a function of demand during lead time.
D) Fourteen is the safety stock, and 100 is the reorder point.
E) None of the above is true.
Correct Answer -B
Which of the following statements regarding the production order quantity
model is TRUE?
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