Quantitative Analysis Test Bank Chapter 6 Inventory Control Models

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Quantitative Analysis For Management 13th by Barry Render -Test Bank

Quantitative Analysis for Management, 13e (Render et al.)
Chapter 6 Inventory Control Models
1) Inventory is such an expensive asset that it may account for as much as 50

percent of a firm’s invested capital.
Answer: TRUE
Diff: Moderate
Topic: INTRODUCTION
LO: 6.1: Understand the importance of inventory control.
AACSB: Analytical thinking
Classification: Concept
2) The same ratio of marginal loss to the sum of marginal loss and marginal
profit is used to solve one-period inventory models for both discrete and
continuous probability distributions.
Answer: TRUE
Diff: Difficult
Topic: SINGLE-PERIOD INVENTORY MODELS
LO: 6.8: Compute single period inventory quantities using marginal analysis.
3) In the decoupling function, some inventory may be stored between each

production process to act as a buffer.
Answer: TRUE
Diff: Moderate
Topic: IMPORTANCE OF INVENTORY CONTROL
4) Service level is the chance, measured in percent, that there will be a

stockout.
Answer: FALSE
Diff: Moderate
Topic: USE OF SAFETY STOCK
LO: 6.7: Understand the use of safety stock.
5) A stockout is a situation that occurs when there is no inventory on hand.
Answer: TRUE
Diff: Easy
Topic: INTRODUCTION
6) The concept of inventory is applicable to both manufacturing and service
organizations.
Answer: TRUE
Diff: Easy
Topic: INTRODUCTION
7) One reason inventory is required is the uneven flow of resources through a

company.
Answer: TRUE
Diff: Moderate
8) Inventory is any stored resource that is used to satisfy a current or future

need.
Answer: TRUE
Diff: Easy
Topic: INTRODUCTION
9) Economic order quantity (EOQ) analysis has recently become practical as a
consequence of high-speed computers.
Answer: FALSE
Diff: Moderate
Topic: ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO

ORDER
LO: 6.3: Use the economic order quantity (EOQ) to determine how much to
order.
10) Inventory is the common thread that ties all the functions and departments
of the organization together.
Answer: TRUE
Diff: Moderate
Topic: INTRODUCTION
11) The purpose of the EOQ model is to achieve a balance between the cost of
holding inventory and the cost of stockouts.
Answer: FALSE
Diff: Easy

ORDER
order.
12) A major objective of inventory models is to minimize inventory costs.
Answer: TRUE
Diff: Easy
Topic: INVENTORY DECISIONS
LO: 6.2: Understand the various types of inventory related decisions.
13) The two fundamental decisions you must make when controlling inventory
are “How much to order? and “What does it cost?”
Answer: FALSE
Diff: Moderate
14) The production run model is useful when a firm purchases inventory that is
delivered over a period of time.
Answer: TRUE
Diff: Moderate
Topic: EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

LO: 6.5: Handle inventory problems that allow noninstantaneous receipt.
15) Salaries and wages for warehouse employees would be categorized as

ordering cost factors.
Answer: FALSE
Diff: Moderate
16) Spoilage, theft and obsolescence are all considered to be carrying cost
factors.
Answer: TRUE
Diff: Easy

ORDER
order.
17) An increase in holding cost will increase the economic order quantity,
holding all other factors constant.
Answer: FALSE
Diff: Moderate

ORDER
order.
18) An increase in ordering cost will increase the economic order quantity,
Answer: TRUE
Diff: Moderate

ORDER
order.
19) The reorder point occurs during a stockout.
Answer: FALSE
Diff: Moderate
Topic: REORDER POINT: DETERMINING WHEN TO ORDER
LO: 6.4: Compute the reorder point (ROP) in determining when to order more
inventory.
20) Safety stock is ignored when computing the reorder point.
Answer: FALSE
Diff: Moderate
21) In a quantity discount model, the purchase cost or material cost must be
included in the total cost calculation.
Answer: TRUE
Diff: Moderate
Topic: QUANTITY DISCOUNT MODELS
LO: 6.6: Handle inventory problems that allow quantity discounts.
22) Theft is one of the “ordering cost factors.”
Answer: FALSE
Diff: Moderate

23) Purchasing department supplies comprise one of the “carrying cost

factors.”
Answer: FALSE
Diff: Moderate
24) We can usually determine an appropriate safety stock even if we are unable
to accurately assess the actual cost of a stockout.
Answer: TRUE
Diff: Easy
25) One of the assumptions of the basic EOQ model is that the receipt of
inventory is instantaneous.
Answer: TRUE
Diff: Moderate

ORDER
order.
26) ABC analysis places inventory into 26 categories for computer analysis.
Answer: FALSE
Diff: Easy
Topic: ABC ANALYSIS
LO: 6.9: Understand the importance of ABC analysis.
27) In ABC inventory analysis, items in the “A” group should have the lowest
dollar value to the firm.
Answer: FALSE
Diff: Moderate
Topic: ABC ANALYSIS
28) The costs involved in a typical inventory model are order costs,
management costs, and holding costs.
Answer: FALSE
Diff: Moderate
29) ERP systems are expensive to buy and costly to customize.
Answer: TRUE
Diff: Moderate
Topic: ENTERPRISE RESOURCE PLANNING
LO: 6.12: Discuss enterprise resource planning systems.
30) In the optimal decision rule using marginal analysis for the single period
model, we will stock an additional unit as long as the probability of selling one or
less unit is less than the ratio ML/(ML + MP) where ML is marginal loss and MP
is marginal profit.
Answer: FALSE
Diff: Moderate
31) For the single-period model, if marginal loss increases relative to marginal
profit, then the optimal order quantity will increase.
Answer: TRUE
Diff: Moderate
32) Kanban is a Japanese word that literally means box.
Answer: FALSE
Diff: Moderate
Topic: JUST-IN-TIME INVENTORY CONTROL
LO: 6.11: Discuss just-in-time inventory concepts to reduce inventory levels

and costs.
33) At a minimum, one container is required using the Kanban system.
Answer: FALSE
Diff: Moderate

and costs.
34) Which of the following is not a use of inventory?
1. A) the decoupling function

2. B) quantity discounts
3. C) irregular supply and demand
4. D) the translucent function
Answer: D
Diff: Easy
35) In making inventory decisions, the purpose of the basic EOQ model is to
1. A) minimize carrying costs.

2. B) minimize ordering costs.
3. C) minimize the sum of carrying costs and ordering costs.
4. D) minimize customer dissatisfaction.
Answer: C
Diff: Moderate
36) Which of the following is not considered a significant inventory cost?
1. A) cost of production labor

2. B) purchase cost
3. C) cost of stockouts
4. D) cost of carrying an item
Answer: A
Diff: Moderate
37) Which of the following is part of the determination of EOQ?
1. A) cost of production labor

2. B) cost of stockouts
3. C) purchase cost
4. D) annual demand
Answer: D
Diff: Moderate

ORDER
order.
38) Which of the following factors is not included in ordering cost?
1. A) bill paying
2. B) obsolescence
3. C) purchasing department overhead costs
4. D) inspecting incoming inventory
Answer: B
Diff: Moderate
39) Which of the following factors is not included in carrying cost?
1. A) spoilage
2. B) obsolescence
3. C) cost of capital
4. D) inspecting incoming inventory
Answer: D
Diff: Moderate
40) Mark Achin sells 3,600 electric motors each year. The cost of these is $200
each, and demand is constant throughout the year. The cost of placing an
order is $40, while the holding cost is $20 per unit per year. There are 360
working days per year and the lead-time is 5 days. If Mark orders 200 units
each time he places an order, what would his total ordering cost be for the
year?
1. A) $2,000
2. B) $2,720
3. C) $200
4. D) $720
Answer: D
Diff: Moderate

ORDER
order.
Classification: Application
41) The annual demand for a product has been projected at 2,000 units. This
demand is assumed to be constant throughout the year. The ordering cost is
$20 per order, and the holding cost is 20 percent of the purchase cost. The
purchase cost is $40 per unit. There are 250 working days per year. Currently,
the company is ordering 500 units each time an order is placed. Assuming the
company uses a safety stock of 20 units resulting in a reorder point of 60 units,
what is the expected lead-time for delivery?
1. A) 4 days
2. B) 5 days
3. C) 6 days
4. D) 7 days
Answer: B
Diff: Difficult
42) The objective of a(n) ________ system is to reduce costs by integrating all
of the operations of a firm.
1. A) MRP
2. B) ERP
3. C) JIT
4. D) VMI
Answer: B
Diff: Moderate
43) R. C. Barker makes purchasing decisions for his company. One product
that he buys costs $50 per unit when the order quantity is less than 500. When
the quantity ordered is 500 or more, the price per unit drops to $48. The
ordering cost is $30 per order and the annual demand is 7,500 units. The
holding cost is 10 percent of the purchase cost. If R. C. orders 500 units each
time he places an order, what would the total annual holding cost be?
1. A) $450
2. B) $1,200
3. C) $1,250
4. D) $2,400
Answer: B
Diff: Moderate
44) Which of the following is not an assumption for the basic EOQ model?
1. A) Only an integer number of orders can be made each year.

2. B) Quantity discounts are not possible.
3. C) Inventory receipt is instantaneous (all at once).
4. D) With orders placed at the correct time, there will be no shortages.
Answer: A
Diff: Moderate
ORDER
order.
45) For the basic EOQ model, which of the following relationships is not true?
1. A) The optimal number of orders per year equals annual demand

divided by the EOQ.
2. B) The reorder point equals daily demand multiplied by the lead-time in
days, excluding safety stock.
3. C) Average inventory level equals one-half the order size.
4. D) The average dollar level of inventory equals unit price multiplied by
order quantity.
Answer: D
Diff: Moderate

ORDER
order.
46) The EOQ model without the instantaneous receipt assumption is

commonly called the
1. A) quantity discount model.

2. B) safety stock model.
3. C) planned shortage model.
4. D) production run model.
Answer: D
Diff: Moderate
47) Which of the following is not a potential drawback of an ERP system?
1. A) Training employees on the use of the new software can be

expensive.
2. B) The software is costly to customize.
3. C) The implementation may require a company to change its normal
operations.
4. D) It does not incorporate inventory control decisions.
Answer: D
Diff: Easy
48) All of the following are used for marginal analysis with the normal
distribution in a single period model except
1. A) mean sales for the product.

2. B) marginal profit for the product.
3. C) marginal loss for the product.
4. D) median sales for the product.
Answer: D
Diff: Easy
49) A structure tree of the components in a product, with a description and the
quantity required to make each product is called a(n)
1. A) ERP system.
2. B) MRP system.
3. C) master production schedule.
4. D) Bill of Materials.
Answer: D
Diff: Easy
Topic: DEPENDENT DEMAND: THE CASE FOR MATERIAL

REQUIREMENTS PLANNING
LO: 6.10: Describe the use of material requirements planning in solving

dependent-demand inventory problems.
50) Sensitivity analysis of EOQ refers to
1. A) the attitude of top management toward the use of the EOQ model.
2. B) analysis of how much the EOQ will change if different input values
are used.
3. C) an assessment of the impact of obsolescence upon the EOQ.
4. D) a study of the impact of storing incompatible products in the same
warehouse.
Answer: B
Diff: Moderate
ORDER
order.
51) Which of the following is not a benefit of a well-developed ERP system?
1. A) It is relatively inexpensive to customize.

2. B) It can integrate all of the operations of a firm.
3. C) It can reduce transaction costs.
4. D) It can increase speed of information.
Answer: A
Diff: Moderate
$20 per order, and the holding cost is 20 percent of the purchase cost.
Currently, the purchase cost is $40 per unit. There are 250 working days per
year. Whenever an order is placed, it is known that the entire order will arrive
on a truck in 6 days. Currently, the company is ordering 250 units each time an
order is placed. What is the total holding cost for the year using this policy?
1. A) $400
2. B) $1,000
3. C) $1,400
4. D) $2,000
Answer: B
Diff: Moderate

ORDER
order.
53) Mark Achin sells 3,600 electric motors each year. The cost of these is $200
each, and demand is constant throughout the year. The cost of placing an
order is $40, while the holding cost is $20 per unit per year. There are 360
working days per year and the lead-time is 5 days. What is his economic order
quantity in units?
1. A) 100
2. B) 200
3. C) 60
4. D) 120
Answer: D
Diff: Moderate

ORDER
order.
54) Andre Candess manages an office supply store. One product in the store
is computer paper. Andre knows that 10,000 boxes will be sold this year at a
constant rate throughout the year. There are 250 working days per year and
the lead-time is 3 days. The cost of placing an order is $30, while the holding
cost is $15 per box per year. If he orders in batches of 500 boxes at a time,
what is his annual ordering cost?
1. A) $200
2. B) $400
3. C) $600
4. D) $800
Answer: C
Diff: Moderate

ORDER
order.
cost is $15 per box per year. If he orders in batches of 500 boxes at a time,
what is his annual holding cost?
1. A) $1500
2. B) $3000
3. C) $3750
4. D) $4500
Answer: C
Diff: Moderate

ORDER
order.
56) Daniel has computed the EOQ for a product he sells to be 400 units.
However, due to recent events he has a cash flow problem. Therefore, he
orders only 100 units each time he places an order. Which of the following is
true for this situation?
1. A) Annual ordering cost will be lower than annual holding cost.

2. B) Annual ordering cost will be higher than annual holding cost.
3. C) Annual ordering cost will equal annual holding cost.
4. D) Annual ordering cost will be unaffected by the order policy change.
Answer: B
Diff: Difficult

ORDER
order.
57) With ________, inventory arrives just before it is needed.
1. A) VMI
2. B) ABC
3. C) ERP
4. D) JIT
Answer: D
Diff: Easy

and costs.
58) In a JIT system, inventory managers can uncover bottlenecks by
introducing or removing which of the following?
1. A) C-kanbans
2. B) P-kanbans
3. C) E-kanbans
4. D) T-kanbans
Answer: B
Diff: Moderate

and costs.
59) Which of the following does not have an impact on EOQ?
1. A) safety stock
2. B) demand per unit time
3. C) order cost
4. D) holding cost
Answer: A
Diff: Moderate

ORDER
order.
60) The demand during the lead-time is normally distributed with a mean of 40
and a standard deviation of 4. If they have calculated a reorder point of 46.60
units, what service level are they assuming?
1. A) 85 percent
2. B) 90 percent
3. C) 95 percent
4. D) 97.5 percent
Answer: C
Diff: Difficult
61) Judith Thompson is the manager of the student center cafeteria. She is
introducing pizza as a menu item. The pizza is ordered frozen from a local
pizza establishment and baked at the cafeteria. Judith anticipates a weekly
demand of 10 pizzas. The cafeteria is open 45 weeks a year, 5 days a week.
The ordering cost is $15 and the holding cost is $0.40 per pizza per year. What
is the optimal number of pizzas Judith should order?
1. A) 184 pizzas
2. B) 9 pizzas
3. C) 5 pizzas
4. D) 28 pizzas
Answer: A
Diff: Moderate

ORDER
order.

62) What shows how many units are needed at every level of production?
1. A) production level tree

2. B) material requirements tree
3. C) decision tree
4. D) material structure tree
Answer: D
Diff: Moderate


63) SAP, Oracle, and PeopleSoft are all examples of
1. A) MRP systems.
2. B) ERP systems.
3. C) JIT systems.
4. D) EDI systems.
Answer: B
Diff: Moderate
holding cost is 10 percent of the purchase cost. If R. C. wishes to minimize his
total annual inventory costs, he must evaluate the total cost for two possible
order quantities. What are these two possible quantities? (Round answer to
nearest unit.)
1. A) 300 and 306

2. B) 300 and 500
3. C) 306 and 50
4. D) 200 and 306
Answer: B
Diff: Moderate
65) The annual demand for a product is 1,000 units. The company orders 200
units each time an order is placed. The lead-time is 6 days, and the company
has determined that 20 units should be held as a safety stock. There are 250
working days per year. What is the reorder point?
1. A) 20
2. B) 24
3. C) 44
4. D) 120
Answer: C
Diff: Moderate

on a truck in 6 days. Currently, the company is ordering 500 units each time an
order is placed. What should be the reorder point (excluding any safety stock)
under the current policy?
1. A) 48
2. B) 100
3. C) 6
4. D) 24
Answer: A
Diff: Moderate
inventory.
cost is $15 per box per year. If Andre orders 500 boxes each time he orders
from his supplier, what would his total annual inventory cost be (holding cost
plus ordering cost)?
1. A) $3,000
2. B) $4,350
3. C) $3,075
4. D) $3,750
Answer: B
Diff: Moderate

ORDER
order.
68) Rolf Steps is the production manager for a local manufacturing firm. This
company produces staplers and other items. The holding cost is $2 per unit
per year. The cost of setting up the production line for this is $25. There are
200 working days per year. The production rate for this product is 80 per day. If
the production order quantity is 200 units, what was the daily demand
(rounded to the nearest whole unit)?
1. A) 6 units
2. B) 7 units
3. C) 8 units
4. D) 9 units
Answer: B
Diff: Difficult
69) The “point at which to reorder” depends directly on which of the following?
1. A) EOQ
2. B) ordering cost
3. C) lead-time
4. D) storage costs
Answer: C
Diff: Moderate
inventory.
70) Judith Thompson, the manager of the student center cafeteria, has added
pizza to the menu. The pizza is ordered frozen from a local pizza
establishment and baked at the cafeteria. Judith anticipates a weekly demand
of 10 pizzas. The cafeteria is open 45 weeks a year, 5 days a week. The
ordering cost is $15 and the holding cost is $0.40 per pizza per year. The pizza
vendor has a 4-day lead-time and Judith wants to maintain 1 pizza for safety
stock. What is the optimal reorder point?
1. A) 10
2. B) 8
3. C) 4
4. D) 9
Answer: D
Diff: Moderate
holding cost is 10 percent of the purchase cost. How many units should R. C.
order to minimize his total annual inventory cost? (Round your answer to the
nearest unit.)
1. A) 300
2. B) 306
3. C) 500
4. D) 200
Answer: C
Diff: Difficult
on a truck in 6 days. How many units should the company order each time an
order is placed if the company wishes to minimize total inventory cost?
1. A) 100
2. B) 200
3. C) 250
4. D) 500
Answer: A
Diff: Moderate

ORDER
order.
73) Consider the material structure tree for item A. If 20 units of A are needed,
how many units of D are needed?
1. A) 30
2. B) 160
3. C) 60
4. D) 220
Answer: D
Diff: Moderate


74) Consider the material structure tree for item A. If 10 units of A are needed,
how many units of E are needed?
1. A) 60
2. B) 6
3. C) 240
4. D) 24
Answer: C
Diff: Moderate

75) Extra inventory that is used to avoid stockouts is known as
1. A) planned shortages.
2. B) quantity discounts.
3. C) safety stock.
4. D) service level.
Answer: C
Diff: Easy
76) An inventory model that can handle dependent demand is called a(n)
1. A) MRP system.
2. B) JIT system.
3. C) ERP system.
4. D) Kanban system.
Answer: A
Diff: Easy



77) As the service level increases
1. A) safety stock increases at a decreasing rate.

2. B) safety stock increases at an increasing rate.
3. C) safety stock decreases at an increasing rate.
4. D) safety stock decreases at a decreasing rate.
Answer: B
Diff: Moderate
78) A person is using the normal distribution to determine the safety stock for a
product. What z value would be associated with a 90 percent service level?
1. A) 0.90
2. B) 1.28
3. C) 0.53
4. D) 0.64
Answer: B
Diff: Moderate
79) The demand during the lead-time is normally distributed with a mean of 40
and a standard deviation of 4. If the company wishes to maintain a 90 percent
service level, how much safety stock should be held?
1. A) 45.12
2. B) 41.28
3. C) 1.28
4. D) 5.12
Answer: D
Diff: Moderate
80) The annual demand for a product is 1,000 units. The company orders 200
units each time an order is placed. The lead-time is 6 days. There are 250
working days per year. If the reorder point is 50, what safety stock are they
using?
1. A) 22
2. B) 4
3. C) 26
4. D) 28
Answer: C
Diff: Difficult
$20 per order, and the holding cost is 20 percent of the purchase cost. The
purchase cost is $40 per unit. There are 250 working days per year. Whenever
an order is placed, it is known that the entire order will arrive on a truck in 6
days. Currently, the company is ordering 500 units each time an order is
placed. What level of safety stock would give a reorder point of 60 units?
1. A) 10
2. B) 14
3. C) 18
4. D) 12
Answer: D
Diff: Difficult
product. The Z value of 1.65 would be associated with what service level?
1. A) 90 percent
2. B) 95 percent
3. C) 100 percent
4. D) 92.5 percent
Answer: B
Diff: Moderate
product. The Z value of 2.33 would be associated with what service level?
1. A) 95 percent
2. B) 97.5 percent
3. C) 98 percent
4. D) 99 percent
Answer: D
Diff: Moderate
84) Rolf Steps is the production manager for a local manufacturing firm. This
company produces staplers and other items. The annual demand for a
particular stapler is 1,600 units. The holding cost is $2 per unit per year. The
cost of setting up the production line is $25. There are 200 working days per
year. The production rate for this product is 80 per day. If Rolf decided to
produce 200 units each time he started production of the stapler, what would
his maximum inventory level be?
1. A) 200
2. B) 180
3. C) 100
4. D) 90
Answer: B
Diff: Difficult

85) Fresh First grocery store purchases bread at $1 per loaf and sells it at
$1.50 a loaf. Any unsold bread is fed to the geese at a local pond. What is the
decision rule?
1. A) Stock an additional unit if P ≥ 0.33.

2. B) Stock an additional unit if P ≥ 0.4.
3. C) Stock an additional unit if P ≥ 0.5.
4. D) Stock an additional unit if P ≥ 0.67.
Answer: D
Diff: Moderate
86) Which of the following statements concerning ABC analysis is false?
1. A) Class B items typically account for 20 percent of the company’s

business in dollars.
2. B) There are typically less class A items in stock than class B.
3. C) Class C items typically account for 70 percent of the company’s
inventory items.
4. D) Class C items tend to have more complex inventory policies than
Class B items.
Answer: D
Diff: Moderate
Topic: ABC ANALYSIS
87) With an annual demand of 2,400 units, daily demand of 10 units, and daily
production rate of 40 units, a company has determined that each production
run will be for 200 units. If production starts when the inventory level is at zero,
how many units would actually be in the warehouse at the end of the first day
of production? (Round your answer to the nearest unit.)
1. A) 12
2. B) 20
3. C) 30
4. D) 40
Answer: C
Diff: Moderate
88) Jack Spratt is the production manager for a manufacturing firm that
produces wizzy-gadgets and other items. The annual demand for a particular
wizzy-gadget is 1,600 units. The holding cost is $2 per unit per year. The cost
of setting up the production line is $25. There are 200 working days per year.
The production rate for this product is 80 per day. If his maximum inventory
level is 180 units, how many units did he produce each time he started
production of the wizzy-gadgets?
1. A) 200
2. B) 180
3. C) 100
4. D) 90
Answer: A
Diff: Difficult

89) Rose Arena is the production manager for a manufacturing firm that
produces buggy whips and other items. The annual demand for a particular
buggy whip is 1,600 units. The holding cost is $2 per unit per year. The cost of
setting up the production line is $25. There are 200 working days per year.
Rose decided to produce 200 units each time she started production of the
buggy whips. If it took her 4 days to produce the 200 units, what was her
production rate?
1. A) 80 units/day
2. B) 60 units/day
3. C) 50 units/day
4. D) 100 units/day
Answer: C
Diff: Easy
90) An organization hosting a 5K race is looking to sell t-shirts at the event.

Demand for t-shirts is believed to be normally distributed with a mean of 100
and standard deviation of 15. With a marginal loss of $4 and marginal profit of
$5, how many t-shirts should the organization stock for the 5K race?
1. A) 98
2. B) 85
3. C) 103
4. D) 115
Answer: C
Diff: Difficult

91) Bret’s bakery must decide how many loaves of fresh bread to produce in a
single day. Daily demand for fresh bread is normally distributed with a mean of
70 loaves and standard deviation of 18. If the marginal loss is $2 and the
marginal profit is $1, how much bread should Bret’s bakery produce in a single
day?
1. A) 88
2. B) 52
3. C) 63
4. D) 78
Answer: C
Diff: Difficult
92) Which of the following statements about the kanban system is false?
1. A) Kanban in Japanese means “card.”

2. B) More than two containers can be used.
3. C) The kanban system is most commonly executed manually.
4. D) One typical kanban rule is that no containers are filled without the
appropriate C-kanban.
Answer: D
Diff: Moderate

and costs.
93) Which of these statements about EOQ is best?
1. A) Under the assumptions made to develop the EOQ model, average

inventory is one-half of the maximum inventory.
2. B) The EOQ model is very sensitive to minor violations of the basic
assumptions.
3. C) The economic order quantity helps one estimate the cost of holding
inventory.
4. D) An increase in holding cost will increase the economic order quantity,
Answer: A
Diff: Moderate

ORDER
order.
94) The campus bookstore knows from the past several semesters that a
certain elementary statistics book has a demand that is approximated by a
normal distribution with a mean of 250 and a standard deviation of 40. They
buy these books for $105 each and sell them to unsuspecting undergraduates
at $222 each. All demand for this book is realized by the middle of the
semester, at which point the bookstore bundles them up and sells them to a
vendor in another country for $40 each. What is the marginal profit for a single
elementary statistics book?
1. A) $40
2. B) $105
3. C) $117
4. D) $222
Answer: C
Diff: Easy
vendor in another country for $40 each. What is the marginal loss for a single
elementary statistics book?
1. A) $40
2. B) $65
3. C) $105
4. D) $117
Answer: B
Diff: Easy
vendor in another country for $40 each. What is the probability of sale for the
last book that the bookstore should purchase for sale to a student?
1. A) 0.357
2. B) 0.412
3. C) 0.475
4. D) 0.525
Answer: A
Diff: Moderate
vendor in another country for $40 each. How many elementary statistics books
should the campus bookstore stock for sale to students?
1. A) 210
2. B) 224
3. C) 250
4. D) 264
Answer: D
Diff: Moderate
vendor in another country for $40 each. How many elementary statistics books
should the campus bookstore stock for sale to students?
1. A) 210
2. B) 224
3. C) 250
4. D) 264
Answer: D
Diff: Moderate
99) Hertz Donuts sells artisanal donuts for $25 per dozen to unsuspecting
hipsters. It costs them $8 per dozen to make donuts and any unsold donuts
are sold as “Oldies But Goodies” for $5 per dozen the next day (or two, no one
really pays attention to the sell-by dates). The demand pattern’s probability
distribution is displayed in the table.
Daily Sales Probability Daily Sales
1 .1 5
2 .1 6
3 .1 7
4 .2 8
How many donuts should they make each day to maximize profit?
1. A) 4 dozen
2. B) 5 dozen
3. C) 6 dozen
4. D) 7 dozen
Answer: C
Diff: Difficult
100) Hertz Donuts sells artisanal donuts for $25 per dozen to unsuspecting
hipsters. It costs them $8 per dozen to make donuts and any unsold donuts
are sold as “Oldies But Goodies” for $5 per dozen the next day (or two, no one
really pays attention to the sell-by dates). The demand pattern’s probability
distribution is displayed in the table.
Daily Sales Probability Daily Sales
1 .1 5
2 .1 6
3 .1 7
4 .2 8
If they elect to make 4 dozen donuts per day what is their expected profit?
1. A) $46.70
2. B) $65.10
3. C) $68.00
4. D) $80.20
Answer: D
Diff: Difficult
101) Consider the material structure tree for item A above. If 30 units of A are
needed, how many units of D are needed?
1. A) 530
2. B) 560
3. C) 460
4. D) 420
Answer: D
Diff: Moderate


needed, how many units of D are needed if there are already 10 B’s and 10 C’s
in inventory?
1. A) 180
2. B) 240
3. C) 260
4. D) 360
Answer: B
Diff: Moderate


needed, how many units of D are needed if there are already 15 B’s, 40 C’s,
and 100 D’s in inventory?
1. A) 210
2. B) 310
3. C) 260
4. D) 360
Answer: A
Diff: Moderate


needed, how many units of D are needed if there are already 40 B’s, 40 C’s,
and 200 D’s in inventory?
1. A) 200
2. B) 320
3. C) 360
4. D) 440
Answer: A
Diff: Moderate


105) Subcomponent J has a one week lead time and a gross requirement of
57 units in Week 6 to fill order 123. There are already 15 J’s in stock at the
beginning of the planning period and these are not needed for any other order
other than 123. What should the planned order release for J’s be in Week 5?
1. A) 0
2. B) 42
3. C) 57
4. D) 72
Answer: B
Diff: Moderate


other than 123. What should be the planned order release for J’s in order to
build product at the latest possible completion time?
1. A) 42 units in week 5
2. B) 42 units in week 6
3. C) 57 units in week 5
4. D) 57 units in week 6
Answer: A
Diff: Moderate


other than 123. What are the gross requirements for J’s in week 6?
1. A) 42 units
2. B) 15 units
3. C) 57 units
4. D) 72 units
Answer: C
Diff: Moderate


108) Which of the following uses of inventory is used to make sure that
adjacent process steps in a production line maintain pace?

3. C) alleviating irregular demand
4. D) the translucent function
Answer: A
Diff: Easy
109) Which of the following uses of inventory is used to make sure that when a
customer places an order it can be filled immediately?

4. D) avoiding stockouts and shortages
Answer: A
Diff: Easy
110) Which of the following uses of inventory is used to make sure that highly
seasonable production is available throughout the year?

2. B) storing resources
4. D) avoiding stockouts and shortages
Answer: B
Diff: Easy
111) One advantage of buying in bulk is
1. A) increased spoilage.
2. B) elevated carrying costs.
3. C) investing in tangible product rather than having cash in an account.
4. D) avoiding stockouts and shortages.
Answer: D
Diff: Moderate
112) East Valve Distributors distributes industrial valves and control devices.
The Eastern control device has an annual demand of 9,375 units and sells for
$100 per unit. The cost of ordering is $160 per order and the average carrying
cost per unit per year is $0.75. Determine the economic order quantity.
Answer: EOQ = 2,000 units

Diff: Moderate

ORDER
order.
113) A company annually uses 1,200 of a certain spare part that costs $25 for
each order and has a $24 annual holding cost. Calculate the total annual cost
for order sizes of: 25, 40, 50, 60, and 100. Identify the economic order quantity,
and consider the implications for making an error in calculating the economic
order quantity.
Answer: Total Cost = total ordering cost + total holding cost
Q = 25 TC = 1200 + 300 = $1,500
Q = 40 TC = 750 + 480 = $1,230
Q = 50 TC = 600 + 600 = $1,200
Q = 60 TC = 500 + 720 = $1,220
Q = 100 TC = 300 + 1200 = $1,500
Q* = [(2 × 1200 × 25)/24]1/2 = 50 units per order
Small variations in order quantity will not have a significant impact on total
costs.
Diff: Difficult

ORDER
order.
114) David and Beth Sheba run a health food store. Their top selling item is
called Heavenly Kelp. The annual demand for this is 810 units, and demand is
constant throughout the year. The cost of placing an order is $20, while the
holding cost per unit per year is $4.
(a) How many orders per year should be placed if they wish to minimize their
total cost?
(b) What is the minimum possible annual holding and ordering cost?
Answer:
(a) EOQ = 90 units. Therefore, the number of orders per year is 810/90 = 9
orders per year.
(b) (90/2)4 + 9($20) = $360 total cost
Diff: Moderate

ORDER
order.
115) Everett Mann’s Dream Store sells waterbeds and supplies. The
best-selling bed in the store has an annual demand of 400 units. The ordering
cost is $40, while the holding cost is $5 per unit per year. There are 250
working days per year, and the lead-time is 6 days.
(a) To minimize total cost, how many units should be ordered each time an
order is placed?
(b) If the holding cost per unit was $6 instead of $5, what would the optimal
order quantity be?
Answer:
(a) EOQ = 80 units

(b) EOQ = 73.03 units if Ch = 6.
Diff: Moderate

ORDER
order.
116) Vicky Payne sells beauty supplies. Her annual demand for a particular
skin lotion is 7,000 units. The cost of placing an order is $10, while the holding
cost per unit per year is 10 percent of the cost. This item currently costs $2.50
if the order quantity is less than 1500. For orders of 1501 units or more, the
cost falls to $2.45. To minimize total cost, how many units should Vicky order
each time she places an order? What is the minimum total cost?
Answer: The EOQ = 1501, the total cost is $17,380.51.
Diff: Difficult
117) Elizabeth Kennedy sells beauty supplies. Her annual demand for a
particular skin spackle is 17,000 units. The cost of placing an order is $50,
while the holding cost per unit per year is 20 percent of the cost. This item
currently costs $12.50 if the order quantity is less than 1500. For orders of
1501 units up to 10,000 units the cost falls to $12.45 and for orders of 10,001
or greater, the cost falls to $12.40. To minimize total cost, how many units
should Elizabeth order each time she places an order? What is the minimum
total cost?
Answer: The EOQ = 1501, the total cost is $214,085. Ordering at Q = 824.6
yields a total cost of $214,561.5 and ordering at 10,001 yields a total cost of
$223,286.2.
Diff: Difficult
118) Suppose that lead-time demand is normally distributed with a mean of

250 units and a standard deviation of 50 units. If a firm wants to maintain a
95% service level, what should the reorder point be?
Answer: 250 + 1.65(50) = 332.2 units
Diff: Moderate
119) ArtHogan, Ltd., distributes mechanical replacements for human mitral

heart valves. Its artificial valve has a demand of 123,456 units per year and
sells for $500 per unit. The cost of ordering is $234 per order and the average
carrying cost per unit per year is 25% of the unit cost. Determine the economic
order quantity.
Answer: EOQ = 680 units
Diff: Moderate

ORDER
order.
120) Furniture Manufacturers Inc. uses 20,000 loads of lumber per year. A
load of lumber costs $500 and the carrying cost is 10 percent of the unit cost.
The cost to order is $200 per order and the lead-time is three working days.
Assuming 200 working days, determine:
(a) the economic order quantity.
(b) the reorder point.
(c) number of orders per year.
(d) working days between orders.
Answer:
(a) EOQ = 400 units
(b) ROP = 100(3) = 300 units
(c) number of orders per year = D/Q = 20,000/400 = 50 orders
(d) working days between orders = 200/50 = 4 days
Diff: Difficult

ORDER & REORDER POINT: DETERMINING WHEN TO ORDER
inventory.
121) A company uses 1,500 per year of a certain subassembly that has an
annual holding cost of $45 per unit. Each order placed costs $150. The
company operates 300 days per year and it has found that an order must be
placed with the supplier 6 working days before it can expect to receive that
order. For this subassembly, find:
(b) the annual holding cost.
(c) the annual ordering cost.
(d) the reorder point.
Answer:
(a) EOQ = 100
(b) annual holding cost = (100/2)(45) = 2250
(c) annual ordering cost = (1500/100)(150) = 2250
(d) ROP = 5(6) = 30 units
Diff: Difficult

inventory.
122) The H.A.L. Computer Store sells a printer for $200. Demand for this is
constant during the year, and annual demand is forecasted to be 600 units.
The holding cost is $20 per unit per year, while the cost of ordering is $60 per
order. Currently, the company is ordering 12 times per year (50 units each
time). There are 250 working days per year and the lead-time is 10 days.
(a) Given the current policy of ordering 50 units at a time, what is the total of
the annual ordering cost and the annual holding cost?
(b) If the company used the absolute best inventory policy, what would the total
of the ordering and holding cost be?
(c) What is the reorder point?
Answer:
(a) TOC + THC = 720 + 500 = $1220

(b) If they order EOQ = 60 units, TOC + THC = 600 + 600 = $1,200
(c) ROP = (600/250)10 = 24 units
Diff: Difficult

inventory.
123) Purinnerds Dog Food is a very popular product at Kay Gnein’s corner
grocery. Demand for this is relatively constant, and the total demand for the
year is 1,200 bags. The cost of placing an order is $50, while the holding cost
is $3 per unit per year. The store is open 300 days per year. Lead-time for this
is 8 days.
(a) If Kay places 50 orders per year, what would her annual ordering and
holding costs be?
(b) If Kay wishes to minimize her total inventory cost, how many units should
she order each time an order is placed?
(c) What is the reorder point?
Answer:
(a) With 50 orders per year, Q = 24. TC = TOC + THC = 2500 + 36 = $2,536
(b) EOQ = 200
(c) ROP = (1200/300)8 = 32 units
Diff: Difficult

order; LO 6.4: Compute the reorder point (ROP) in determining when to order
more inventory.
124) A company uses 2,750 per year of a certain subassembly that has a
purchase cost of $450, and an annual holding cost of $500 per unit. Each
order placed costs $150. The company operates 300 days per year and it has
found that an order must be placed with the supplier 12 working days before it
can expect to receive that order. For this subassembly, find:
(b) the reorder point.
Answer:
(a) [2(2750)(150)/500]1/2 = 40.6 units
(b) (2750/300)(12) = 110 units
Diff: Moderate

order; LO 6.4: Compute the reorder point (ROP) in determining when to order
more inventory.
125) The H.A.L. Computer Store sells a printer for $400. Demand for this is
constant during the year, and annual demand is forecasted to be 1350 units.
The holding cost is $20 per unit per year, while the cost of ordering is $90 per
order. Currently, the company is ordering 12 times per year (92 units each
time). There are 270 working days per year and the lead-time is 8 days. What
should be the reorder point?
Answer: (1350/270)(8) = 40 units
Diff: Moderate
inventory.
126) The Handy Manufacturing Company manufactures small air conditioner

compressors. The estimated demand for the year is 12,000 units. The setup
cost for the production process is $200 per run, and the carrying cost is $10.00
per unit per year. The daily production rate is 100 units per day, and demand
has been 50 units per day. Determine the number of units to produce in each
batch. (The problem assumes 240 operating days.)
Answer: Optimum production quantity = {[2(12,000)(200)]/[10(1 −

50/100)]}1/2 = 979.8 units
Diff: Moderate
127) Anne Beck recently took over a beauty supply store. Her predecessor
always ordered shampoo in quantities of 100 units. Anne is reevaluating this
policy. Based on her analysis, the cost to place each order is $35 and the
holding cost is $8 per shampoo bottle per year. The annual demand for this
product is 2500 bottles. Should Anne change the current order policy and, if so,
how much can she save?
Answer: Current inventory policy parameters:

D = 2500, Q = 100, # of orders = 25, Average inventory = 50, Order cost =
$875,
Holding cost = $400, Total inventory cost = $875 + $400 = $1,275
Optimal inventory policy parameters:
Q* = 147.9, or 148 bottles, # of orders = 16.89, Average inventory = 74, Order

cost = $591.15,
Holding cost = $592, Total inventory cost = $591.15 + $592 = $1,183.15
She should change her order policy.
Savings = $1,275 – $1,183.15 = $91.85
Diff: Difficult

ORDER
order.
128) Candy Incorporated stocks bubble gum game cards, an item that has a
normally distributed demand during the reorder period with a mean of 12
dozen boxes and a standard deviation of two dozen boxes. If it is desirable to
experience a stockout only 10 percent of the time, what is the appropriate
safety stock?
Answer: For 90 percent service level, the safety stock = 1.28(2) = 2.56 units.
Diff: Moderate
129) The purchasing manager for a firm is trying to determine what the safety
stock should be for a particular product. She has developed the following table,
which gives the distribution of demand during the lead-time and the
probabilities:
Demand During Lead-Time Probability
40 0.20
50 0.25
60 0.25
70 0.20
80 0.10
The carrying cost is $5 per unit per year, the ordering cost is $30 per order,
and the stockout cost is $40 per unit. The reorder point is 60 units, and 6
orders are placed each year. What level of safety stock should be maintained?
Answer:
Safety Stock Additional Holding Cost Stockout Cost
0 0 (10)(0.2)(40)(10) + (20)(0.1)(40)(10)
10 50 (10)(0.1)(40)(10)
20 100 0
Therefore, 20 units of safety stock should be carried.
Diff: Difficult
130) Fresh First grocery store faces demand for freshly squeezed orange juice.
The daily demand for freshly squeezed pomegranate juice ranges from 0 to 5
gallons. The grocery store offers the juice in a special 1 gallon bottle that will
be discarded after a day. Each gallon costs $2 to make and is sold for $5. The
daily demand for pomegranate juice varies according to the following
distribution:
x p(x)
0 0.05
1 0.2
2 0.4
3 0.2
4 0.1
5 0.05
How many gallons of juice should the store make each day?
Answer: Since the rule is P ≥ 2/(2 + 3) = 0.4; since P ≥ (3) = .35 and P ≥ (2)
= .75, the store should produce 2 gallons a day.
Diff: Moderate
131) A professional baseball organization chooses to sell game day programs.

Demand for game day programs is normally distributed with a mean of 2,000
and standard deviation of 300. If the marginal loss is $1 and the marginal profit
is $3, how many programs should the baseball organization print?
Answer: P = ML/(ML + MP) = 0.25. Z = 0.6745. X = 2,000 + 0.6745(300) =
2202.35.
Therefore, the baseball organization should print 2203 programs.
Diff: Difficult
132) Demand for local newspapers in King County during weekdays is

normally distributed with a mean of 500 and standard deviation of 100. The
marginal loss per paper is $0.10 and marginal profit is $0.40. How many
newspapers should the local publisher produce each day?
Answer: P = ML/(ML + MP) = 0.20. Z = 0.8416. X = 1,000 + 0.8416(100) =

1,084.16.
Therefore, the newspaper organization should print 1085 newspapers.
Diff: Difficult
133) Consider the material structure tree for item A below. Assume 15 units of
A are needed.
(a) How many units of B are needed?

(b) How many units of C are needed?
(c) How many units of D are needed?
(d) How many units of E are needed?
Answer: (a) 3 * 15 = 45. (b) 4 * 15 = 60. (c) 3 * 3 * 5 + 2 * 4 * 15 = 255. (d) 5 * 3

* 15 + 6 * 4 * 15 = 585.
Diff: Moderate


134) Consider the material tree structure for material A. Assume 10 units are
needed.
(a) How many units of B are needed?
(b) How many units of C are needed?
(c) How many units of D are needed?
(d) How many units of E are needed?
(e) How many units of F are needed?
Answer: (a) 40 (b) 40 (c) 20 (d)120 (e) 80
Diff: Moderate

135) What are the five uses of inventory?
Answer: 1) The decoupling function 2) Storing resources 3) Irregular supply

and demand 4) Quantity discounts and 5) Avoiding stockouts and shortages
Diff: Moderate
136) Explain the purpose of ABC analysis.
Answer: The purpose of ABC analysis is to divide all of a company’s

inventory items into three groups (group A, group B, and group C) based on
the overall inventory value of the items. A prudent manager should spend
more time managing those items representing the greatest dollar inventory
cost (A items) because this is where the greatest potential savings are.
Diff: Moderate
Topic: ABC ANALYSIS
137) List three general categories of inventory.

Answer: raw material, work-in-process inventory, finished goods inventory
Diff: Moderate
Topic: INTRODUCTION
138) Explain how inventory can act as a buffer in the production process.
Answer: Storing some inventory helps to decouple the manufacturing process

within the organization.
Diff: Moderate
139) List several disadvantages of buying inventory in large quantities.
Answer: higher storage cost, more spoilage, damaged stock, theft, insurance,
less cash to invest
Diff: Moderate
140) What is the purpose of all inventory models?
Answer: The purpose of all inventory models and techniques is to determine

rationally how much to order and when to order.
Diff: Moderate
141) List major carrying cost factors.
Answer: cost of capital, taxes, insurance, spoilage, theft, obsolescence,

warehouse personnel wages, utilities and building costs for the warehouse,
and supplies such as forms and paper for the warehouse
Diff: Moderate
142) List major ordering cost factors.
Answer: developing and sending purchase orders, processing and inspecting

incoming inventory, bill paying, inventory inquiries, and purchasing department
expenses and supplies
Diff: Moderate

143) Explain the basic difference(s) between the simple EOQ model and the
production run model.
Answer: In the simple EOQ, inventory delivery is assumed to occur

instantaneously, while in the production run model, inventory is assumed to be
produced (or “delivered”) over time.
Diff: Moderate
144) Discuss why it is sometimes prudent not to order the minimum level
required to obtain a quantity discount.
Answer: The increased holding cost associated with ordering the minimum
level required for the discount may outweigh the savings from the quantity
discount.
Diff: Moderate
145) How does a kanban system help identify bottlenecks and production
problems?
Answer: Production bottlenecks and problems can be uncovered by reducing
the amount of inventory in the system. Inventory is often used to cover these
problems by using it as a buffer between adjacent operations. Many production
managers remove containers and their associated P-kanbans from the kanban
system in order to “starve” the production line to uncover bottlenecks and
potential problems. When the production line stops or is starved for inventory,
the problem area is quickly located.
Diff: Moderate

and costs.
146) Briefly describe the progression from MRP to ERP systems.
Answer: Over the years, MRP has evolved to include not only the materials
required in production but also the labor hours, material cost, and other
resources related to production. When approached in this fashion, the
term MRP II is often used, and the word resource replaces the
word requirements. As this concept evolved and sophisticated computer
software programs were developed, these systems were called enterprise
resource planning (ERP) systems. The objective of an ERP system is to
reduce costs by integrating all of the operations of a firm. This starts with the
supplier of the materials needed and flows through the organization to include
invoicing the customer for the final product. Data are entered once into a
database, and then these data can be quickly and easily accessed by anyone
in the organization.
Diff: Moderate
147) What are the potential benefits and detriments of an ERP
implementation?
Answer: The benefits of a well-developed ERP system are reduced

transaction costs and increased speed and accuracy of information. However,
there are drawbacks as well. The software is expensive to buy and costly to
customize. The implementation of an ERP system may require a company to
change its normal operations, and employees are often resistant to change.
Also, training employees on the use of the new software can be expensive.
Diff: Moderate
Quantitative Analysis for Management, 13e (Render et al.)
Chapter 7 Linear Programming Models: Graphical and Computer

Methods
1) Management resources that need control include machinery usage, labor

volume, money spent, time used, warehouse space used, and material usage.
Answer: TRUE
Diff: Easy
Topic: INTRODUCTION
LO: 7.1: Identify the basic assumptions and properties of linear programming
(LP).
2) In the term linear programming, the word programming comes from the
phrase “computer programming.”
Answer: FALSE
Diff: Moderate
Topic: INTRODUCTION
(LP).
3) One of the assumptions of LP is “simultaneity.”
Answer: FALSE
Diff: Moderate
Topic: REQUIREMENTS OF A LINEAR PROGRAMMING PROBLEM
(LP).
4) Any linear programming problem can be solved using the graphical solution
procedure.
Answer: FALSE
Diff: Easy
Topic: GRAPHICAL SOLUTION TO AN LP PROBLEM
LO: 7.3: Graphically solve any LP problem that has only two variables by both
the corner point and the isoprofit line methods.

5) An LP formulation typically requires finding the maximum value of an

objective while simultaneously maximizing usage of the resource constraints.
Answer: FALSE
Diff: Moderate
Topic: FORMULATING LP PROBLEMS
LO: 7.2: Formulate a linear programming problem algebraically.
6) There are no limitations on the number of constraints or variables that can

be graphed to solve an LP problem.
Answer: FALSE
Diff: Easy
7) Resource restrictions are called constraints.
Answer: TRUE
Diff: Easy
(LP).
8) One of the assumptions of LP is “proportionality.”
Answer: TRUE
Diff: Moderate
(LP).
9) The set of solution points that satisfies all of a linear programming problem’s
constraints simultaneously is defined as the feasible region in graphical linear
programming.
Answer: TRUE
Diff: Moderate
10) An objective function is necessary in a maximization problem but is not

required in a minimization problem.
Answer: FALSE
Diff: Easy
(LP).
11) In some instances, an infeasible solution may be the optimum found by the
corner point method.
Answer: FALSE
Diff: Moderate
12) The rationality assumption implies that solutions need not be in whole
numbers (integers).
Answer: FALSE
Diff: Moderate
(LP).
13) The solution to a linear programming problem must always lie on a
constraint.
Answer: TRUE
Diff: Moderate
14) In a linear program, the constraints must be linear, but the objective
function may be nonlinear.
Answer: FALSE
Diff: Moderate
(LP).
15) Resource mix problems use LP to decide how much of each product to
make, given a series of resource restrictions.
Answer: FALSE
Diff: Moderate

16) The existence of non-negativity constraints in a two-variable linear

program implies that we are always working in the northwest quadrant of a
graph.
Answer: FALSE
Diff: Moderate
17) The shadow price is the same as the dual price in maximization problems.
Answer: TRUE
Diff: Moderate
Topic: SENSITIVITY ANALYSIS
LO: 7.7: Understand the role of sensitivity analysis.
18) The term slack is associated with ≥ constraints.
Answer: FALSE
Diff: Moderate

19) The term surplus is associated with ≥ constraints.
Answer: TRUE
Diff: Moderate
20) Any time that we have an isoprofit line that is parallel to a constraint, we
have the possibility of multiple solutions.
Answer: TRUE
Diff: Moderate
Topic: FOUR SPECIAL CASES IN LP
LO: 7.6: Understand special issues in LP such as infeasibility,

unboundedness, redundancy, and alternative optimal solutions.
21) If the isoprofit line is not parallel to a constraint, then the solution must be
unique.
Answer: TRUE
Diff: Moderate

22) When two or more constraints conflict with one another, we have a
condition called unboundedness.
Answer: FALSE
Diff: Moderate

23) The addition of a redundant constraint lowers the isoprofit line.
Answer: FALSE
Diff: Moderate

24) Sensitivity analysis enables us to look at the effects of changing the

coefficients in the objective function, one at a time.
Answer: TRUE
Diff: Moderate
25) In a minimization problem, the isocost line is used rather than an isoprofit
line.
Answer: TRUE
Diff: Moderate
Topic: SOLVING MINIMIZATION PROBLEMS
LO: 7.5: Understand the difference between minimization and maximization

objective functions.
26) Unlike a maximization problem, a two-variable minimization problem may

not be solved graphically.
Answer: FALSE
Diff: Easy

27) In a minimization problem, the isocost line slides down and to the left
through a feasible region to reflect decreasing costs.
Answer: TRUE
Diff: Moderate

28) When using Solver to find a solution for an LP problem, both the left-hand
side and the right-hand side of your constraints must be a formula calculated
using the cells containing the decision variables.
Answer: FALSE
Diff: Moderate
Topic: SOLVING FLAIR FURNITURE’S LP PROBLEM USING QM FOR

WINDOWS AND EXCEL 2016 AND EXCEL QM
LO: 7.4: Use Excel spreadsheets to solve LP problems.
29) If you enter inequalities such as “≤” directly into your Excel spreadsheet,
you do not need to designate them when defining constraints using Solver.
Answer: FALSE
Diff: Moderate


30) Constraints do not need to be entered one at a time when using Solver.
Answer: TRUE
Diff: Easy

31) A widely used mathematical programming technique designed to help

managers and decision making relative to resource allocation is called
1. A) linear programming.
2. B) computer programming.
3. C) constraint programming.
4. D) goal programming.
Answer: A
Diff: Easy
Topic: INTRODUCTION
(LP).
32) Which of the following is not a property of all linear programming
problems?
1. A) the presence of restrictions

2. B) optimization of some objective
3. C) a computer program
4. D) alternate courses of action to choose from
Answer: C
Diff: Moderate
(LP).
33) A feasible solution to a linear programming problem
1. A) must be a corner point of the feasible region.

2. B) must satisfy all of the problem’s constraints simultaneously.
3. C) need not satisfy all of the constraints, only the non-negativity
constraints.
4. D) must give the maximum possible profit.
Answer: B
Diff: Moderate
34) Infeasibility in a linear programming problem occurs when
1. A) a constraint is redundant.
2. B) more than one solution is optimal.
3. C) the feasible region is unbounded.
4. D) there is no solution that satisfies all the constraints given.
Answer: D
Diff: Moderate

35) In a maximization problem, when one or more of the solution variables and
the profit can be made infinitely large without violating any constraints, the
linear program has
1. A) an infeasible solution.
2. B) an unbounded solution.
3. C) a redundant constraint.
4. D) alternate optimal solutions.
Answer: B
Diff: Moderate

36) Which of the following is not a part of every linear programming problem
formulation?
1. A) an objective function
2. B) a set of constraints
3. C) non-negativity constraints
4. D) a redundant constraint
Answer: D
Diff: Moderate
(LP).
37) When appropriate, the optimal solution to a maximization linear

programming problem can be found by graphing the feasible region and
1. A) finding the profit at every corner point of the feasible region to see
which one gives the highest value.
2. B) moving the isoprofit lines towards the origin in a parallel fashion until
the last point in the feasible region is encountered.
3. C) locating the point that is highest on the graph.
4. D) sliding the constraints to find the greatest point of intersection.
Answer: A
Diff: Moderate
38) The mathematical theory behind linear programming states that an optimal
solution to any problem will lie at a(n) ________ of the feasible region.
1. A) interior point or center

2. B) maximum point or minimum point
3. C) corner point or extreme point
4. D) interior point or extreme point
Answer: C
Diff: Easy
39) Which of the following is not a property of linear programs?
1. A) one objective function

2. B) at least two separate feasible regions
3. C) alternative courses of action
4. D) one or more constraints
Answer: B
Diff: Easy
(LP).
40) The corner point solution method
1. A) will always provide one, and only one, optimum.

2. B) will yield different results from the isoprofit line solution method.
3. C) requires that the profit from all corners of the feasible region be
compared.
4. D) requires that all corners created by all constraints be compared.
Answer: C
Diff: Moderate
41) When a constraint line bounding a feasible region has the same slope as
an isoprofit line
1. A) there may be more than one optimum solution.

2. B) the problem involves redundancy.
3. C) an error has been made in the problem formulation.
4. D) a condition of infeasibility exists.
Answer: A
Diff: Moderate

42) The simultaneous equation method is
1. A) an alternative to the corner point method.

2. B) useful only in minimization methods.
3. C) an algebraic means for solving the intersection of two or more
constraint equations.
4. D) useful only when more than two product variables exist in a product
mix problem.
Answer: C
Diff: Moderate
43) Consider the following linear programming problem:
Maximize 12X + 10Y
Subject to: 4X + 3Y ≤ 480
2X + 3Y ≤ 360
all variable ≥ 0
The maximum possible value for the objective function is
1. A) 360.
2. B) 480.
3. C) 1520.
4. D) 1560.
Answer: C
Diff: Difficult

Maximize 4X + 10Y
4X + 2Y ≤ 360
all variable ≥ 0
The feasible corner points are (48,84), (0,120), (0,0), (90,0). What is the
maximum possible value for the objective function?
1. A) 1032
2. B) 1200
3. C) 360
4. D) 1600
Answer: B
Diff: Moderate
Maximize 5X + 6Y
1X + 2Y ≤ 120
all variable ≥ 0
Which of the following points (X,Y) is not a feasible corner point?
1. A) (0,60)
2. B) (105,0)
3. C) (120,0)
4. D) (100,10)
Answer: C
Diff: Moderate
Maximize 5X + 6Y
1X + 2Y ≤ 120
all variable ≥ 0
Which of the following points (X,Y) is not feasible?
1. A) (50,40)
2. B) (20,50)
3. C) (60,30)
4. D) (90,10)
Answer: A
Diff: Moderate

47) Two models of a product — Regular (X) and Deluxe (Y) — are produced
by a company. A linear programming model is used to determine the
production schedule. The formulation is as follows:
Maximize profit = 50X + 60Y
Subject to: 8X + 10Y ≤ 800 (labor hours)
X + Y ≤ 120 (total units demanded)
4X + 5Y ≤ 500 (raw materials)
all variable ≥ 0
The optimal solution is X = 100, Y = 0.
How many units of the regular model would be produced based on this
solution?
1. A) 0
2. B) 100
3. C) 50
4. D) 120
Answer: B
Diff: Easy
48) Two models of a product — Regular (X) and Deluxe (Y) — are produced
by a company. A linear programming model is used to determine the
production schedule. The formulation is as follows:
Maximize profit = 50X + 60Y
Subject to: 8X + 10Y ≤ 800 (labor hours)
X + Y ≤ 120 (total units demanded)
4X + 5Y ≤ 500 (raw materials)
all variable ≥ 0
The optimal solution is X = 100, Y = 0.
Which of these constraints is redundant?
1. A) the first constraint

2. B) the second constraint
3. C) the third constraint
4. D) the fourth constraint
Answer: B
Diff: Difficult


Minimize 20X + 30Y
6X + 3Y ≥ 300
X, Y ≥ 0
What is the optimum solution to this problem (X,Y)?
1. A) (0,0)
2. B) (50,0)
3. C) (0,100)
4. D) (400,0)
Answer: B
Diff: Difficult
Maximize 20X + 30Y
Subject to: X + Y ≤ 80
8X + 9Y ≤ 600
3X + 2Y ≥ 400
X, Y ≥ 0
This is a special case of a linear programming problem in which
1. A) there is no feasible solution.

2. B) there is a redundant constraint.
3. C) there are multiple optimal solutions.
4. D) this cannot be solved graphically.
Answer: A
Diff: Difficult
51) Which of the following is not acceptable as a constraint in a linear

programming problem (maximization)?
Constraint 1 X + XY + Y ≥ 12
Constraint 2 X – 2Y ≤ 20
Constraint 3 X + 3Y = 48
Constraint 4 X + Y + Z ≤ 150
1. A) Constraint 1
2. B) Constraint 2
3. C) Constraint 3
4. D) Constraint 4
Answer: A
Diff: Moderate
(LP).
52) If one changes the contribution rates in the objective function of an LP
1. A) the feasible region will change.

2. B) the slope of the isoprofit or isocost line will change.
3. C) the optimal solution to the LP is sure to no longer be optimal.
4. D) the problem will no longer be linear.
Answer: B
Diff: Moderate
53) Sensitivity analysis may also be called
1. A) postoptimality analysis.
2. B) nonparametric programming.
3. C) preoptimality analysis.
4. D) redundancy testing
Answer: A
Diff: Moderate
54) Sensitivity analyses are used to examine the effects of changes in
1. A) contribution rates for each variable.

2. B) degree space.
3. C) the modeler.
4. D) the degrees of freedom in the numerator
Answer: A
Diff: Moderate
55) Which of the following is a basic assumption of linear programming?
1. A) The condition of uncertainty exists.

2. B) Independence exists for the activities.
3. C) Proportionality exists in the objective function and constraints.
4. D) Divisibility does not exist, allowing only integer solutions.
Answer: C
Diff: Moderate
(LP).
56) If the addition of a constraint to a linear programming problem does not
change the solution, the constraint is said to be
1. A) unbounded.
2. B) non-negative.
3. C) infeasible.
4. D) redundant.
Answer: D
Diff: Moderate

57) Which of the following is not an assumption of LP?
1. A) simultaneity
2. B) certainty
3. C) proportionality
4. D) divisibility
Answer: A
Diff: Moderate
(LP).
58) The difference between the left-hand side and right-hand side of a
less-than-or-equal-to constraint is referred to as
1. A) surplus.
2. B) constraint.
3. C) slack.
4. D) shadow price.
Answer: C
Diff: Moderate
59) The difference between the left-hand side and right-hand side of a
greater-than-or-equal-to constraint is referred to as
1. A) surplus.
2. B) constraint.
3. C) slack.
4. D) shadow price.
Answer: A
Diff: Moderate
60) A constraint with zero slack or surplus is called a
1. A) nonbinding constraint.
2. B) resource constraint.
3. C) binding constraint.
4. D) nonlinear constraint.
Answer: C
Diff: Easy

61) The coefficients of the variables in the constraint equations that represent
the amount of resources needed to produce one unit of the variable are called
1. A) technological coefficients.
2. B) objective coefficients.
3. C) shadow prices.
4. D) dual prices.
Answer: A
Diff: Moderate
62) A constraint with positive slack or surplus is called a
1. A) nonbinding constraint.
2. B) resource constraint.
3. C) binding constraint.
4. D) nonlinear constraint.
Answer: A
Diff: Easy

63) A straight line representing all non-negative combinations of X1 and X2 for

a particular profit level is called a(n)
1. A) objective line.
2. B) sensitivity line.
3. C) profit line.
4. D) isoprofit line.
Answer: D
Diff: Moderate
64) In order for a linear programming problem to have a unique solution, the
solution must exist
1. A) at the intersection of the non-negativity constraints.

2. B) at the intersection of a non-negativity constraint and a resource
constraint.
3. C) at the intersection of the objective function and a constraint.
4. D) at the intersection of two or more constraints.
Answer: D
Diff: Moderate
65) In order for a linear programming problem to have multiple solutions, the
solution must exist
1. A) at the intersection of the non-negativity constraints.

2. B) on a non-redundant constraint parallel to the objective function.
3. C) at the intersection of the objective function and a constraint.
4. D) at the intersection of three or more constraints.
Answer: B
Diff: Moderate

Maximize 12X + 10Y
2X + 3Y ≤ 360
all variables ≥ 0
Which of the following points (X,Y) is feasible?
1. A) (10,120)
2. B) (120,10)
3. C) (30,100)
4. D) (60,90)
Answer: C
Diff: Moderate
Maximize 5X + 6Y
1X + 2Y ≤ 120
all variables ≥ 0
Which of the following points (X,Y) is in the feasible region?
1. A) (30,60)
2. B) (105,5)
3. C) (0,210)
4. D) (100,10)
Answer: D
Diff: Moderate
Maximize 5X + 6Y
1X + 2Y ≤ 120
all variables ≥ 0
Which of the following points (X,Y) is feasible?
1. A) (50,40)
2. B) (30,50)
3. C) (60,30)
4. D) (90,20)
Answer: C
Diff: Moderate
69) Which of the following is not an assumption of LP?

1. A) certainty
2. B) proportionality
3. C) divisibility
4. D) multiplicativity
Answer: D
Diff: Moderate
(LP).
Maximize 20X + 30Y
Subject to: X + Y ≤ 80
12X + 12Y ≤ 600
3X + 2Y ≤ 400
X, Y ≥ 0

Answer: B
Diff: Difficult

71) Which of the following functions is not linear?
1. A) 5X + 3Z
2. B) 3X + 4Y + Z – 3
3. C) 2X + 5YZ
4. D) Z
Answer: C
Diff: Easy
(LP).
72) Which of the following is not one of the steps in formulating a linear
program?
1. A) Graph the constraints to determine the feasible region.

2. B) Define the decision variables.
3. C) Use the decision variables to write mathematical expressions for the
objective function and the constraints.
4. D) Identify the objective and the constraints.
Answer: A
Diff: Moderate

73) What type of problems use LP to decide how much of each product to
make, given a series of resource restrictions?
1. A) resource mix
2. B) product restriction
3. C) resource allocation
4. D) product mix
Answer: D
Diff: Moderate
Consider the sensitivity report below for the problems which follow.
74) The optimal solution to this linear program is
1. A) x1 = 34, x2 = 40.
2. B) x1 = 6, x2 = 11.
3. C) x1 = 7.33, x2 = 6.
4. D) x1 = 3, x2 = 6.
Answer: D
Diff: Easy

75) Which of the following constraints are binding?
1. A) Extrusion only
2. B) Packing only
3. C) Additive only
4. D) Extrusion and Packaging
Answer: D
Diff: Moderate
76) What is the increase in the objective value if 2 units of extrusion are
added?
1. A) 3
2. B) 6
3. C) 48
4. D) 96
Answer: B
Diff: Moderate
77) What is the increase in the objective value if 2 units of packaging are
added?
1. A) 11
2. B) 18
3. C) 22
4. D) 36
Answer: C
Diff: Moderate
78) What is the increase in the objective value if 2 units of additive are added?
1. A) 0
2. B) 4
3. C) 12
4. D) 16
Answer: A
Diff: Moderate
Maximize 10X + 30Y

Subject to: X + 2Y ≤ 80
8X + 16Y ≤ 640
4X + 2Y ≥ 100
X, Y ≥ 0

Answer: B
Diff: Difficult

80) Consider the following constraints from a linear programming problem:
2X + Y ≤ 200
X + 2Y ≤ 200
X, Y ≥ 0
If these are the only constraints, which of the following points (X,Y) cannot be
the optimal solution?
1. A) (0, 0)
2. B) (0, 200)
3. C) (0,100)
4. D) (100, 0)
Answer: B
Diff: Difficult
81) Consider the following constraints from a linear programming problem:
2X + Y ≤ 200
X + 2Y ≤ 200
X, Y ≥ 0
If these are the only constraints, which of the following points (X,Y) cannot be
the optimal solution?
1. A) (0, 0)
2. B) (0, 100)
3. C) (65, 65)
4. D) (100, 0)
Answer: C
Diff: Difficult
82) Classic New Orleans desserts include pralines, pecan pie and Bananas
Foster — all three are absolutely essential to eat on any trip to the city. Chefs
may quibble about this ingredient list as there are dozens of variations on each
recipe, but these ingredients are common to most formulations. A recipe for a
dozen pralines takes a cup of pecans, two cups of brown sugar, a cup of
granulated sugar, a half teaspoon of vanilla and a tablespoon of rum. A pecan
pie takes two cups of pecans, a cup of brown sugar, a cup of cane syrup, a cup
of granulated sugar, a teaspoon of vanilla, and a tablespoon of rum. A recipe
for Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of
granulated sugar, a banana, and a tablespoon of rum and makes two servings.
Bananas Foster is considered a dessert for two and is priced accordingly at
$15. Your pantry has on hand 24 cups of pecans, 40 cups of brown sugar, 12
cups of cane syrup, 20 cups of granulated sugar, 40 teaspoons of vanilla,
twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen
and a pecan pie costs $22.40. Which of these is an appropriate objective
function?
1. A) Max Z = $7.5BF + $11.34Pr + $11.20Pe

2. B) Max Z = $15BF + $22.68Pr 9 $22.40Pe
3. C) Max Z = $7.5BF + $22.68Pr + $22.40Pe
4. D) Max Z = $15BF + $11.34Pr + $11.20Pe
Answer: B
Diff: Moderate
and a pecan pie costs $22.40. Which of these is an appropriate constraint?
1. A) 1Pr + 2Pe + 1BF ≤ 24

2. B) 1Pr + 2Pe + 1BF ≤ 40
3. C) Pe ≤ 24
4. D) 1BF ≤ 40
Answer: A
Diff: Moderate
1. A) 1Pr + 2Pe + 1BF ≤ 40

2. B) 2Pr + 1Pe + 1BF ≤ 24
3. C) Pe ≤ 12
4. D) 1BF ≤ 40
Answer: C
Diff: Moderate
1. A) 1Pr + 2Pe + 1BF ≤ 40

2. B) 2Pr + 1Pe + 1BF ≤ 24
3. C) Pe ≥ 12
4. D) BF ≥ 0
Answer: D
Diff: Moderate

86) Classic New Orleans desserts include pralines and Bananas Foster —
both are absolutely essential to eat on any trip to the city. Chefs may quibble
about this ingredient list as there are dozens of variations on each recipe, but
these ingredients are common to most formulations. A recipe for a dozen
pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated
sugar, a half teaspoon of vanilla and a tablespoon of rum. A recipe for
Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of
twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen.
Your first constraint for a graphical solution has been plotted. Which constraint
is it?
1. A) the Praline constraint

2. B) the Bananas Foster constraint
3. C) the pecan constraint
4. D) the brown sugar constraint
Answer: D
Diff: Moderate
87) Classic New Orleans desserts include pralines and Bananas Foster —
both are absolutely essential to eat on any trip to the city. Chefs may quibble
about this ingredient list as there are dozens of variations on each recipe, but
these ingredients are common to most formulations. A recipe for a dozen
pralines takes a cup of pecans, two cups of brown sugar, a cup of granulated
sugar, a half teaspoon of vanilla and a tablespoon of rum. A recipe for
Bananas Foster requires a cup of pecans, a cup of brown sugar, a cup of
twelve bananas, and 64 tablespoons of rum. Pralines sell for $22.68 per dozen.
Your first constraint for a graphical solution has been plotted. Which constraint
is it?
1. A) the Praline constraint

2. B) the Bananas Foster constraint
3. C) the pecan constraint
4. D) the brown sugar constraint
Answer: C
Diff: Moderate
Classic New Orleans desserts include pralines, pecan pie and Bananas Foster
— all three are absolutely essential to eat on any trip to the city. Chefs may
quibble about this ingredient list as there are dozens of variations on each
and a pecan pie costs $22.40. The Sensitivity Report from an Excel
formulation of this problem is show below.
88) What is the most you would pay for one more cup of brown sugar?
1. A) $0
2. B) $0.28
3. C) $$0.12
4. D) $0.40
Answer: B
Diff: Moderate
89) What is the most you would pay for one more cup of pecans?
1. A) $0
2. B) $0.20
3. C) $$0.24
4. D) $0.40
Answer: A
Diff: Moderate

90) You don’t use any of the
1. A) pecans.
2. B) rum.
3. C) cane syrup.
4. D) vanilla.
Answer: C
Diff: Moderate
91) You can actually take in $453.60 with this setup. If you had only one more
cup of granulated sugar what could your profit be?
1. A) $453.60
2. B) $454.73
3. C) $473.60
4. D) $475.72
Answer: D
Diff: Moderate
92) You can actually take in $453.60 with this setup. Suppose your most
important customer comes to you and demands you make her an order of
Bananas Foster. What is your profit if you add one recipe of Bananas Foster to
your production mix?
1. A) $446.20
2. B) $453.60
3. C) $461.00
4. D) $473.60
Answer: D
Diff: Moderate
93) A furniture company is producing two types of furniture. Product A requires

8 board feet of wood and 2 lbs of wicker. Product B requires 6 board feet of
wood and 6 lbs of wicker. There are 2000 board feet of wood available for
product and 1000 lbs of wicker. Product A earns a profit margin of $30 a unit
and Product B earns a profit margin of $40 a unit. What should the objective
function be?
1. A) Maximize 30A + 40B

2. B) Maximize 10A + 12B
3. C) Maximize 14Wood + 8Wicker
4. D) Maximize 8A + 2A + 6B + 6B
Answer: A
Diff: Moderate
and Product B earns a profit margin of $40 a unit. Which of these is an
appropriate constraint for Wicker?
1. A) 30A + 40B ≤ 1000

2. B) 10A + 12B ≤ 1000
3. C) 8A + 2B ≤ 1000
4. D) 2A + 6B ≤ 1000
Answer: D
Diff: Moderate

and Product B earns a profit margin of $40 a unit. Which of these is an
appropriate constraint for Wood?
1. A) 30A + 40B ≤ 2000

2. B) 8A + 6B ≤ 2000
3. C) 8A + 2B ≤ 2000
4. D) 2A + 6B ≤ 2000
Answer: B
Diff: Moderate

96) As a supervisor of a production department, you must decide the daily

production totals of a certain product that has two models, the Deluxe and the
Special. The profit on the Deluxe model is $12 per unit and the Special’s profit
is $10. Each model goes through two phases in the production process, and
there are only 100 hours available daily at the construction stage and only 80
hours available at the finishing and inspection stage. Each Deluxe model
requires 20 minutes of construction time and 10 minutes of finishing and
inspection time. Each Special model requires 15 minutes of construction time
and 15 minutes of finishing and inspection time. The company has also
decided that the Special model must comprise at least 40 percent of the
production total. What is an appropriate objective function?
1. A) Maximize 2D + 2.5S
2. B) Maximize 12D + 10S
3. C) Maximize 4D + 2.5S
4. D) Maximize 100D + 80S
Answer: B
Diff: Moderate

production total. What is an appropriate constraint for the construction time?
1. A) 20D + 15S ≥ 6000

2. B) 20D + 15S ≤ 100
3. C) 20D + 15S ≤ 6000
4. D) 20D + 15S ≥ 100
Answer: C
Diff: Moderate

production total. What is an appropriate constraint for the finishing time?
1. A) 10D + 15S ≤ 4800

2. B) 10D + 15S ≥ 100
3. C) 10D + 15S ≤ 80
4. D) 15D + 10S ≥ 100
Answer: C
Diff: Moderate


production total. The optimal product mix should include
1. A) 120D’s.
2. B) 120S’s.
3. C) 200D’s.
4. D) 200S’s.
Answer: A
Diff: Moderate
100) Consider the following linear program.
Maximize 30X + 10Y
Subject to: 3X + Y ≤ 300
X + Y ≤ 200
X ≤ 100
Y ≥ 50
X,Y ≥ 0
Which of these is NOT a corner point of the feasible region?
1. A) (0,50)
2. B) (50,50)
3. C) (50,150)
4. D) (75,50)
Answer: D
Diff: Difficult
101) Consider the following linear program:
Maximize 30X + 10Y
X + Y ≤ 200
X ≤ 100
Y ≥ 50
X,Y ≥ 0
What is the optimal solution?
1. A) $3,000
2. B) $3,200
3. C) $3,400
4. D) $3,600
Answer: A
Diff: Difficult
102) The Greatest Generation Food Company wishes to introduce a new

brand of pureed ready-to-eat meals (composed of pureed chicken and pureed
liver meat products) that meets certain nutritional requirements. The
liver-flavored product contains 1 unit of nutrient A and 2 units of nutrient B,
while the chicken-flavored product contains 1 unit of nutrient A and 4 units of
nutrient B. According to federal requirements, there must be at least 40 units of
nutrient A and 60 units of nutrient B in a package of the new meals. In addition,
the company has decided that there can be no more than 15 units of
liver-flavored meat product in a package. It costs 1 cent to make a
liver-flavored product and 2 cents to make a chicken-flavored product. What is
an appropriate objective function for this scenario?
1. A) Minimize L + 2C
2. B) Maximize L + 2C
3. C) Minimize L + C
4. D) Maximize L + C
Answer: A
Diff: Moderate


liver-flavored product and 2 cents to make a chicken-flavored product. Are
there any redundant constraints in this scenario?
1. A) L + C ≤ 100
2. B) L + 2C ≥ 40
3. C) Minimize 2L + 4C ≥ 60
4. D) There are no redundant constraints.
Answer: C
Diff: Difficult

liver-flavored product and 2 cents to make a chicken-flavored product. What is
the minimum cost?
1. A) 65 cents
2. B) 70 cents
3. C) 75 cents
4. D) 80 cents
Answer: A
Diff: Difficult

liver-flavored product and 2 cents to make a chicken-flavored product. At what
point does the optimal solution exist?
1. A) (30,0)
2. B) (0,40)
3. C) (15,25)
4. D) (0,0)
Answer: C
Diff: Difficult
106) A furniture company is producing two types of furniture. Product A

requires 8 board feet of wood and 2 lbs of wicker. Product B requires 6 board
feet of wood and 6 lbs of wicker. There are 2000 board feet of wood available
for product and 1000 lbs of wicker. Product A earns a profit margin of $30 a
unit and Product B earns a profit margin of $40 a unit. Formulate the problem
as a linear program.
Answer: Let X1 = number of units of Product A
X2 = number of units of Product B
Maximize 30X1 + 40X2
Subject to: 8X1 + 6X2 ≤ 2000
2X1 + 6X2 ≤ 1000
X1, X2 ≥ 0
Diff: Moderate

production total.
(a) Formulate this as a linear programming problem.
(b) Find the solution that gives the maximum profit.
Answer:
(a) Let X1 = number of Deluxe models
X2 = number of Special models
Maximize 12X1 + 10X2
Subject to: 1/3 X1 + 1/4 X2 ≤ 100
1/6 X1 + 1/4 X2 ≤ 80
-0.4X1 + 0.6X2 ≥ 0
X1, X2 ≥ 0
(b) Optimal solution: X1 = 120, X2 = 240 Profit = $3,840
Diff: Difficult
Topic: FORMULATING LP PROBLEMS and GRAPHICAL SOLUTION TO

AN LP PROBLEM
LO: 7.2: Formulate a linear programming problem algebraically; LO 7.3:

Graphically solve any LP problem that has only two variables by both the
corner point and the isoprofit line methods.
108) The Fido Dog Food Company wishes to introduce a new brand of dog
biscuits (composed of chicken and liver-flavored biscuits) that meets certain
nutritional requirements. The liver-flavored biscuits contain 1 unit of nutrient A
and 2 units of nutrient B, while the chicken-flavored ones contain 1 unit of
nutrient A and 4 units of nutrient B. According to federal requirements, there
must be at least 40 units of nutrient A and 60 units of nutrient B in a package of
the new biscuit mix. In addition, the company has decided that there can be no
more than 15 liver-flavored biscuits in a package. If it costs 1 cent to make a
liver-flavored biscuit and 2 cents to make a chicken-flavored one, what is the
optimal product mix for a package of the biscuits in order to minimize the firm’s
cost?
(a) Formulate this as a linear programming problem.
(b) Find the optimal solution for this problem graphically.
(c) Are any constraints redundant? If so, which one or ones?
(d) What is the total cost of a package of dog biscuits using the optimal mix?
Answer:
(a) Let X1 = number of liver-flavored biscuits in a package
X2 = number of chicken-flavored biscuits in a package
Minimize X1 + 2X2
Subject to: X1 + X2 ≥ 40
2X1 + 4X2 ≥ 60
X1 ≤ 15
X1, X2 ≥ 0
(b) Corner points (0,40) and (15,25)
Optimal solution is (15,25) with cost of 65.
(c) 2X1 + 4X2 ≥ 60 is redundant.
(d) minimum cost = 65 cents
Diff: Difficult
AN LP PROBLEM

109) Consider the following linear program:
Maximize 30X + 10Y
X + Y ≤ 200
X ≤ 100
Y ≥ 50
X,Y ≥ 0
(a) Solve the problem graphically. Is there more than one optimal solution?
Explain.
(b) Are there any redundant constraints?
Answer:
(a) Corner points (0,50), (0,200), (50,50), (75,75), (50,150)
Optimum solutions: (75,75) and (50,150). Both yield a profit of $3,000.
(b) The constraint X1 ≤ 100 is redundant since 3X1 + X2 ≤ 300 also means that
X1 cannot exceed 100.
Diff: Difficult

110) Solve the following linear programming problem using the corner point
method:
Maximize 10X + 1Y
2X + 4Y ≤ 40
Y≥3
X, Y ≥ 0
Answer: Feasible corner points (X,Y): (0,3) (0,10) (2.4,8.8) (6.75,3)
Maximum profit 70.5 at (6.75,3).
Diff: Difficult
111) Solve the following linear programming problem using the corner point
method:
Maximize 3X + 5Y
1X + 2Y ≤ 20
Y≥2
X, Y ≥ 0
Answer: Feasible corner points (X,Y): (0,2) (0,10) (4,8) (10,2)
Maximum profit is 52 at (4,8).
Diff: Difficult
112) Billy Penny is trying to determine how many units of two types of lawn
mowers to produce each day. One of these is the Standard model, while the
other is the Deluxe model. The profit per unit on the Standard model is $60,
while the profit per unit on the Deluxe model is $40. The Standard model
requires 20 minutes of assembly time, while the Deluxe model requires 35
minutes of assembly time. The Standard model requires 10 minutes of
inspection time, while the Deluxe model requires 15 minutes of inspection time.
The company must fill an order for 6 Deluxe models. There are 450 minutes of
assembly time and 180 minutes of inspection time available each day. How
many units of each product should be manufactured to maximize profits?
Let X = number of Standard models to produce
Y = number of Deluxe models to produce
Maximize 60X + 40Y

10X + 15Y ≤ 180
Y≥6
X, Y ≥ 0
Answer: Maximum profit is $780 by producing 9 Standard and 6 Deluxe

models.
Diff: Difficult

AN LP PROBLEM

113) Two advertising media are being considered for promotion of a product.
Radio ads cost $400 each, while newspaper ads cost $600 each. The total
budget is $7,200 per week. The total number of ads should be at least 15, with
at least 2 of each type. Each newspaper ad reaches 6,000 people, while each
radio ad reaches 2,000 people. The company wishes to reach as many people
as possible while meeting all the constraints stated. How many ads of each
type should be placed?
Answer: Let R = number of radio ads placed
N = number of newspaper ads placed
Maximize 2000R + 6000N
Subject to: R + N ≥ 15
400R + 600N ≤ 7200
R≥2
N≥2
R, N ≥ 0
Feasible corner points (R,N): (9,6) (13,2) (15,2)
Maximum exposure 54,000 with 9 radio and 6 newspaper ads.
Diff: Difficult

AN LP PROBLEM

114) Suppose a linear programming (minimization) problem has been solved

and the optimal value of the objective function is $300. Suppose an additional
constraint is added to this problem. Explain how this might affect each of the
following:
(a) the feasible region.
(b) the optimal value of the objective function.
Answer:
(a) Adding a new constraint will reduce the size of the feasible region unless it
is a redundant constraint. It can never make the feasible region any larger.
However, it could make the problem infeasible.
(b) A new constraint can only reduce the size of the feasible region; therefore,
the value of the objective function will either increase or remain the same. If
the original solution is still feasible, it will remain the optimal solution.
Diff: Moderate
Topic: GRAPHICAL SOLUTION TO AN LP PROBLEM and FOUR SPECIAL

CASES IN LP
the corner point and the isoprofit line methods; LO 7.6: Understand special
issues in LP such as infeasibility, unboundedness, redundancy, and alternative
optimal solutions.

Quantitative Analysis Test Bank Chapter 6 Inventory Control Models

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Quantitative Analysis For Management 13th by Barry Render -Test Bank

Chapter 6 Inventory Control Models

1) Inventory is such an expensive asset that it may account for as much as 50

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

Topic: SINGLE-PERIOD INVENTORY MODELS

AACSB: Analytical thinking

3) In the decoupling function, some inventory may be stored between each

Topic: IMPORTANCE OF INVENTORY CONTROL

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

4) Service level is the chance, measured in percent, that there will be a

Topic: USE OF SAFETY STOCK

LO: 6.7: Understand the use of safety stock.

AACSB: Analytical thinking

5) A stockout is a situation that occurs when there is no inventory on hand.

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

7) One reason inventory is required is the uneven flow of resources through a

Topic: IMPORTANCE OF INVENTORY CONTROL

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

8) Inventory is any stored resource that is used to satisfy a current or future

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

Topic: ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO

AACSB: Analytical thinking

LO: 6.1: Understand the importance of inventory control.

AACSB: Analytical thinking

Topic: ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO

AACSB: Analytical thinking

12) A major objective of inventory models is to minimize inventory costs.

Topic: INVENTORY DECISIONS

LO: 6.2: Understand the various types of inventory related decisions.

AACSB: Analytical thinking

Topic: INVENTORY DECISIONS

LO: 6.2: Understand the various types of inventory related decisions.

AACSB: Analytical thinking

Topic: EOQ WITHOUT THE INSTANTANEOUS RECEIPT ASSUMPTION

AACSB: Analytical thinking

15) Salaries and wages for warehouse employees would be categorized as

Topic: INVENTORY DECISIONS

LO: 6.2: Understand the various types of inventory related decisions.

AACSB: Analytical thinking

Topic: ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO

AACSB: Analytical thinking

Topic: ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO

AACSB: Analytical thinking

Topic: ECONOMIC ORDER QUANTITY: DETERMINING HOW MUCH TO

AACSB: Analytical thinking

19) The reorder point occurs during a stockout.

Topic: REORDER POINT: DETERMINING WHEN TO ORDER

AACSB: Analytical thinking

Topic: USE OF SAFETY STOCK

LO: 6.7: Understand the use of safety stock.

AACSB: Analytical thinking

Topic: QUANTITY DISCOUNT MODELS

LO: 6.6: Handle inventory problems that allow quantity discounts.

AACSB: Analytical thinking

22) Theft is one of the “ordering cost factors.”