### What is the order quantity with the highest expected payoff

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Question 1

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages \$22 and the item has a holding cost of \$3 per unit per year.

Use the information in Scenario D.1. What is the economic production lot size (ELS)?

Fewer than or equal to 400 units

Greater than 400 units but fewer than or equal to 480 units

Greater than 480 units but fewer than or equal to 500 units

Greater than 500 units

Question 2

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages \$22 and the item has a holding cost of \$3 per unit per year.

Use the information in Scenario D.1. If Jerry chooses to produce batches dictated by the economic production lot size (ELS) model, how many days elapse between the start of consecutive production runs (what is the time between runs or TBO)?

Fewer than or equal to 8 days

Greater than 8 days but fewer than or equal to 10 days

Greater than 10 days but fewer than or equal to 12 days

Greater than 12 days

Question 3

Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages \$22 and the item has a holding cost of \$3 per unit per year.

Use the information in Scenario D.1. If Jerry chooses to produce the batch size suggested by the economic production lot size (ELS) model, what is the annual cost?

Less than or equal to \$900

Greater than \$900 but less than or equal to \$950

Greater than \$950 but less than or equal to \$1000

Greater than \$1000

Question 4

1. In a noninstantaneous replenishment model, as the daily demand approaches the daily production rate, which statement is wrong:

the number of production runs per year decreases.

the length in days of a production run increases.

the economic lot size increases.

the time between production runs decreases.

Question 5

1. Which one of the following statements about quantity discounts is best?

The minimum cost point on each price curve is always feasible.

A price break is the maximum quantity needed to get a discount.

If the EOQ for the lowest price is feasible, this is the best lot size.

Either price or quantity is sufficient for the search for the best lot size.

Question 6

Kyle store sells K2 skis. The store makes a \$200 profit per unit sold during the ski season, but it should take a \$50 loss per unit if sold after the season is over. The following discrete probability distribution has been estimated for the season's demand.
Demand (D) Demand Probablitiy
10 0.1
20 0.3
30 0.3
40 0.2
50 0.1

Use the information in Scenario D.2. What is the payoff with an order quantity (Q) of 40 units if the demand (D) is 30 units?

Less than or equal to \$2,000

Greater than \$2,000 but less than or equal to \$4,000

Greater than \$4,000 but less than or equal to \$6,000

Greater than \$6,000

Question 7

Consider an item with the following discrete demand distribution for a one-time inventory decision.
Demand (D) Demand Probablitiy
10 0.15
20 0.20
30 0.30
40 0.20
50 0.15

This item experiences a seasonal demand pattern. A profit of \$15 per unit is made if the item is sold in season, but a loss of \$10 per unit is incurred if sold after the season is over.

Use the information in Scenario D.3. What is the payoff when 40 units are ordered but a demand of 50 materializes?

\$150

\$300

\$450

\$600

Question 8

Scenario D.3

Consider an item with the following discrete demand distribution for a one-time inventory decision.

Demand (D) Demand Probablitiy
10 0.15
20 0.20
30 0.30
40 0.20
50 0.15

This item experiences a seasonal demand pattern. A profit of \$15 per unit is made if the item is sold in season, but a loss of \$10 per unit is incurred if sold after the season is over.

Use the information in Scenario D.3. What is the order quantity with the highest expected payoff?

20 units

30 units

40 units

50 units

Question 9

1. Which of these statements about the one-period model is best?

Purchasing a quantity with the highest expected payoff will result in a positive payoff regardless of demand during the period.

The loss per unit cannot exceed the profit per unit.

If demand exceeds the purchased quantity then the payoff exceeds the expected payoff.

The expected payoff is always less than the actual payoff.

Question 10

1. Consider a noninstantaneous replenishment situation in which the production rate is 100 units per day, the demand rate is four units per day, and the economic production lot size is 500 units. Which of the following statements is true?

The average cycle inventory is fewer than 225 units.

The average cycle inventory is greater than 300 units.

The rate of buildup in cycle inventory during the production cycle is fewer than 100 units per day.

The rate of buildup in cycle inventory during the production cycle is greater than or equal to 400 units per day.

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