Question

1. In certain case, when the demand might be greater than the stock, then it is difficult to calculate

a. Cost of lost sales

b. Cost of placing an order

c. Cost of setting up a production unit

d. Cost of backorders

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2. Often to achieve economies of scale while shipping the products, ___________________ type of inventory model is used

a. Placing multiple orders within a planning horizon

b. Waiting up to a pre-established inventory levels

c. P-system

d. Q-System

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3. Which of the following is not an assumption of EOQ model?

a. Demand is deterministic

b. Replenishment is instantaneous

c. Constant lead times

d. Economies of scale

.

4. Ordering cost will not include

a. Loading and unloading cost

b. Cost of processing RFQ

c. Expense of purchase department

d. Cost of set-up change

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5. If the demand becomes half and carrying cost increases three time, the EOQ will

a. Increase by 40%

b. Will become half

c. Decrease by 40%

d. Will become double

6. Activity based costing is easy to calculate in a

a. Fixed layout

b. Job shop layout

c. Product layout

d. Process layout

Answer 1

1. Option A
   When the demand exceeds the inventory stock then it becomes difficult to calculate the cost of lost sales because of not the availability of enough stock to fulfill the demand. However, we can calculate the costs but it is difficult to do so. Hence, option A is correct.
2. Option C
   The P-system inventory is suitable for shipping economies of scale because of p-system has a fixed period replenishment for order quantity that is predetermined. Hence, the p-system inventory is most likely to be used in economies of scale. Hence, option C is correct.
3. Option D
   Economies of scale are not one of the assumptions of the EOQ model. Hence, option D.
4. Option B
   The ordering costs include the cost of labor for loading and unloading along with purchase order expenses. It does not include the cost of processing RFQ. Hence, option B.
5. Option C

The new EOQ will be,

Hence, EOQ will decrease by 40%.

6 Option B
The job shop facility layout is most easy to calculate activity-based costing. Hence, option B.