Assignment 8

1. Benefits of inventory control are

1. Improvement in delivery to customer
2. Economy in purchasing
3. Discount against bulk purchase
4. Elimination of the possibility of duplicate ordering
a. 1, and 2 only
b. 2, and 3 only
c. 1, 2, and 3 only
d. 1, 2, 3, and 4
2. In an inventory model, the relevant costs are
a. Purchase cost of product
b. Carrying cost
c. Ordering cost and carrying cost
c. Purchase cost, ordering cost, carrying cost
3. An industry follows the ABC approach for inventory control. Class of A item describes
the
a. High value and low risk
b. Low value and high risk
c. High value and high risk
d. Low value and low risk
4. Large size of inventory is a sign of
a. Better scheduling
b. Inefficiency
c. Better planning
d. High profit
5. Economic order quantity is
a. Inversely proportional to ordering cost
b. Directly proportional to ordering cost
c. Directly proportional to square root of ordering cost
d. Inversely proportional to square root of ordering cost
6. Excessive inventory may cause the
a. Low carrying cost
b. High carrying cost
c. High ordering cost
d. All of above
7. The annual demand of a product in a market is 40000. The cost of placing an order is Rs.
1600. And the inventory cost of each product is Rs. 8. Economic order quantity will be
a. 2000
b. 4000
c. 6000
d. 8000
 2𝑅𝐶𝑜 2∗40000∗1600
Solution: EOQ = √ =√ = 4000
𝐼 8
8. A product has a demand of 4000 units per year. The cost of placing an order is Rs. 20 and
the holding cost per unit is Rs. 4 per year. The optimum number of orders/ year will be
a. 200
b. 100
c. 20
d. 10
2𝑅𝐶𝑜 2∗4000∗20
Solution: EOQ= √ =√ =200
𝐼 4
𝐴𝑛𝑛𝑢𝑎𝑙 𝑑𝑒𝑚𝑎𝑛𝑑
Optimum no. of order =𝐸𝑐𝑜𝑛𝑜𝑚𝑖𝑐 𝑜𝑟𝑑𝑒𝑟 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦= 4000/200= 20 orders
9. In a gradual replenishment model of inventory as compared to Wilson model
a. Inventory is filled up instantaneously
b. Inventory build up when production is more than the demand rate
c. Inventory build up when demand is more than the production rate
d. Shortage is allowed
10. For gradual replenishment inventory model, true statement is
a. Maximum inventory level is equal to the reordered quantity
b. Maximum inventory level is more than the reordered quantity
c. Maximum inventory level is less than the reordered quantity
d. Demand rate is more than the production rate