(Multiple Choice)
1. Which of the following is not an advantageous reason to reduce inventories?
a. Inventories provide a competitive advantage.
b. Inventories can invite overproduction.
C. Inventories are expensive to maintain
d. Inventories may conceal problems.
e. All of these are good reasons to reduce inventories.

2. The fundamental EOQ model
a. provides for fluctuating lead times during reorder cycles.
b. is relatively insensitive to errors in demand, procurement costs, and carrying costs.
c. focuses on the trade-off between production costs and carrying costs.
d. is stochastic in nature.
e. is best used in conjunction with a periodic inventory system.

3. Refer to the equation for the EOQ in the text. Car Country, a local Ford dealer, sells 1,280 small SUVs each year, Keeping a car on the lot costs Car Country $200 per month, so the company prefers to order as few SUVs as is economically feasible. However, each time an order is placed, the company incurs total costs of $300. Of this $300, $240 is fixed and $60 is variable. Determine the company’s economic order quantity.
a. 8
b. 16
c. 18
d. 56
e. 62

Questions 4 through 6 are based on the diagram below, which represents the EOQ model.


.:.
4. Which line segment represents the reorder lead time?
a. AB
b. AE
c. AF
d. BC
e. AC

5. Which line segment identifies the quantity of safety stock maintained?
a. AB
b. AE
c. AC
d. BC
e. EF

6. Which line segment represents the length of time to consume the total quantity of materials ordered?
a. DE
b. BC
c. AC
d. AE
e. AD

7. Which of the following is NOT a principle of lean manufacturing?
a. Products are pushed from the production end to the customer.
b. All activities that do not add value and maximize the use of scarce resources must be eliminated.
c. Achieve high inventory turnover race.
d. A lean manufacturing firm must have established and cooperative relationships with vendors.
e. All of the above are lean manufacturing principles.

8. All of the following are problems with traditional accounting information EXCEPT:
a. Managers in a JIT setting require immediate information.
b. The measurement principle tends to ignore standards other than money.
c. Variance analysis may yield insignificant values.
d. The overhead component in a manufacturing company is usually very large.
e. All of these are problems associated with traditional accounting information.

9. Which of the following is NOT a problem associated with standard cost accounting?
a. Standard costing motivates management to produce large batches of products and build inventory.
b. Applying standard costing leads to product cost distortions in a lean environment.
c. Standard costing data are associated with excessive time lags that reduce its usefulness.
d. The financial orientation of standard costing may promote bad decisions.
e. All of the above are problems with standard costing.

10. Which one of the following statements is true?
a. ERP evolved directly from MRP.
b. ERP evolved into MRP and MRP evolved into MRP II.
c. MRP II evolved from MRP and MRP II evolved into ERP.
d. None of the above is true.