16 Questions
What does the vertical axis represent in the economic order quantity graph?
Holding costs
Which cost increases as the average inventory level and order quantity increase in the economic order quantity graph?
Holding costs
What is the formula to calculate the maximum level of inventory?
Reorder level + Reorder quantity - (Minimum usage x Minimum lead time)
What does the EOQ formula calculate?
Optimal order quantity
What does the maximum level of inventory act as in inventory management?
Signal for wasteful levels
Where is the economic order quantity (EOQ) found on the economic order quantity graph?
At the point where holding costs equal ordering costs
How is the minimum level of inventory calculated?
Reorder level - (Average usage x Average lead time)
Which cost decreases as inventory levels and order quantities increase in the economic order quantity graph?
Reorder costs
What is the purpose of buffer inventory in the context of inventory management?
To cover for uncertainties in demand and supply
Which factor determines the buffer inventory needed in inventory management?
Minimum usage
What is the purpose of maintaining inventory at the optimum level?
To minimize costs
Which of the following is NOT one of the three critical control levels in inventory management?
Lead time level
What does the minimum level indicate in inventory management?
Stockouts are possible
How is the reorder level calculated in inventory management?
By multiplying maximum usage by maximum lead time
What does the maximum lead time represent in inventory management?
Time between placing an order and inventory availability
Why is it important to calculate inventory control levels?
To maintain inventories at the optimum level
Test your knowledge on inventory management calculations such as reorder level, maximum level, and lead time. This quiz is based on a scenario involving a retailer with multiple outlets and a central warehouse.
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