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16 Questions

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Inventory Management Calculation Quiz

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Questions and Answers

What does the vertical axis represent in the economic order quantity graph?

Reorder level

Average inventory levels

Holding costs (correct)

Order quantities

Which cost increases as the average inventory level and order quantity increase in the economic order quantity graph?

Reorder costs

Lead time costs

Shortage costs

Holding costs (correct)

What is the formula to calculate the maximum level of inventory?

Reorder level - (Average usage x Average lead time)

Reorder level + Reorder quantity

Reorder level - Reorder quantity

Reorder level + Reorder quantity - (Minimum usage x Minimum lead time) (correct)

What does the EOQ formula calculate?

Optimal order quantity Signup and view all the answers

What does the maximum level of inventory act as in inventory management?

Signal for wasteful levels Signup and view all the answers

Where is the economic order quantity (EOQ) found on the economic order quantity graph?

At the point where holding costs equal ordering costs Signup and view all the answers

How is the minimum level of inventory calculated?

Reorder level - (Average usage x Average lead time) Signup and view all the answers

Which cost decreases as inventory levels and order quantities increase in the economic order quantity graph?

Reorder costs Signup and view all the answers

What is the purpose of buffer inventory in the context of inventory management?

To cover for uncertainties in demand and supply Signup and view all the answers

Which factor determines the buffer inventory needed in inventory management?

Minimum usage Signup and view all the answers

What is the purpose of maintaining inventory at the optimum level?

To minimize costs Signup and view all the answers

Which of the following is NOT one of the three critical control levels in inventory management?

Lead time level Signup and view all the answers

What does the minimum level indicate in inventory management?

Stockouts are possible Signup and view all the answers

How is the reorder level calculated in inventory management?

By multiplying maximum usage by maximum lead time Signup and view all the answers

What does the maximum lead time represent in inventory management?

Time between placing an order and inventory availability Signup and view all the answers

Why is it important to calculate inventory control levels?

To maintain inventories at the optimum level Signup and view all the answers