Inventory Management Concepts Quiz

What does EOQ stand for in inventory management?

• Economic Order Quantity

• Essential Order Quotient

• Estimated Order Quantity

• Effective Order Quota

The EOQ model is primarily used to:

• Minimize labor costs

• Optimize ordering and holding costs

• Reduce material wastage

• Maximize production efficiency

Which of the following is the correct formula for EOQ?

• EOQ = √(2 × Demand × Ordering Cost / Holding Cost)

• EOQ = (Demand × Ordering Cost) / Holding Cost

• EOQ = √(2 × Holding Cost / Ordering Cost)

• EOQ = (Demand × Holding Cost) / Ordering Cost

Minimum stock level is calculated as:

• Reorder level + (Average usage × Lead time)

• Reorder level - (Average usage × Lead time)

• Maximum stock level - Reorder level

• Average stock level + Lead time

If the reorder level is 500 units and the lead time is 5 days with a daily usage rate of 50 units, what is the minimum stock level?

• 250 units

• 500 units

• 1000 units

• 1250 units

What happens if the stock level falls below the minimum stock level?

• Overstocking occurs

• Production stops or delays may happen

• Costs decrease

• Inventory turnover increases

Which of the following factors affects the reorder level?

• Lead time

• Demand rate

• Safety stock level

• All of the above

The purpose of setting a maximum stock level is to:

• Ensure there is no shortage of stock

• Minimize excess capital tied in inventory

• Increase order frequency

• Reduce transportation costs

A company has a maximum stock level of 5,000 units, a minimum stock level of 1,500 units, and an average stock level of 3,000 units. What is the reorder level if the lead time usage is 2,500 units?

• 1,500 units

• 2,500 units

• 3,500 units

• 5,000 units

Which of the following statements about EOQ is TRUE?

• A higher EOQ always leads to lower costs

• EOQ is independent of holding and ordering costs

• EOQ helps balance ordering and holding costs

• EOQ is always a fixed value for any business