Question 1

Identify the typical cost components that constitute ordering costs in inventory systems.

Accepted Answer

Typical components of ordering costs include cost of supplies,forms,order processing,clerical support,and so forth.

Question 2

What is MRO an acronym for? What is the function of MRO inventories?

Accepted Answer

MRO inventories are devoted to maintenance/repair/operating supplies.They exist because the need and timing for maintenance and repair of some equipment are unknown.

Question 3

In the simple EOQ model,if annual demand were to increase,the EOQ would increase proportionately.

Accepted Answer

A) True 
 B)False  False

Question 4

A toy manufacturer makes its own wind-up motors,which are then put into its toys.While the toy manufacturing process is continuous,the motors are intermittent flow.Data on the manufacture of the motors appears below.
Annual demand (D)= 50,000 units Daily subassembly production rate = 1,000
Setup cost (S)= $85 per batch Daily subassembly usage rate = 200
Carrying cost = $.20 per unit per year
(a)To minimize cost,how large should each batch of subassemblies be?
(b)Approximately how many days are required to produce a batch?
(c)How long is a complete cycle?
(d)What is the average inventory for this problem?
(e)What is the total annual inventory cost (holding plus setup)of the optimal behavior in this problem?

Accepted Answer

(a)Q*_p = @#IMG-DLM& = 7288.7 or 7289 units. (b)It w

Question 5

Service level is the complement of the probability of a stockout.

Accepted Answer

A) True 
 B)False

Question 6

Thomas' Bike Shop stocks a high volume item that has a normally distributed demand during lead time.The average daily demand is 70 units,the lead time is 4 days,and the standard deviation of demand during lead time is 15.
a.How much safety stock provides a 95% service level to Thomas?
b.What should the reorder point be?

Accepted Answer

a.SS = 1.65 × 15 = 2

Question 7

Daily demand for a product is normally distributed with a mean of 150 units and a standard deviation of 15 units.The firm currently uses a reorder point system,and it seeks a 75% service level during the lead time of 6 days.
a.What safety stock is appropriate for the firm?
b.What is the reorder point?

Accepted Answer

a.SS = 0.67 × 15 × @#IMG-DLM&

Question 8

The fixed-period inventory model can have a stockout during the review period as well as during the lead time,which is why fixed-period systems require more safety stock than fixed-quantity systems.

Accepted Answer

A) True 
 B)False

Question 9

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

Accepted Answer

A) a stockout can occur during the review period as well as during the lead time. 
B) this model is used for products that have large standard deviations of demand. 
C) this model is used for products that require very high service levels. 
D) replenishment is not instantaneous. 
E) setup costs and holding costs are large. 
A) a stockout can occur during the review period as well as during the lead time. 
B) this model is used for products that have large standard deviations of demand. 
C) this model is used for products that require very high service levels. 
D) replenishment is not instantaneous. 
E) setup costs and holding costs are large.

Question 10

A specific product has demand during lead time of 100 units,with a standard deviation during lead time of 25 units.What safety stock (approximately)provides a 95% service level?

Accepted Answer

A) 41 
B) 55 
C) 133 
D) 140 
E) 165 
A) 41 
B) 55 
C) 133 
D) 140 
E) 165

Question 11

Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80.They currently have no salvage value.If the stand owner is able to find an outlet that would provide a salvage value of $0.10,what would be the increase in service level?

Accepted Answer

A) .5 
B) 0 
C) .07 
D) 1 
E) unable to determine given only the above information 
A) .5 
B) 0 
C) .07 
D) 1 
E) unable to determine given only the above information

Question 12

In the EOQ model,for a given level of demand,annual holding cost is larger as the order quantity is ________.

Accepted Answer

The answer of In the EOQ model,for a given level...

Question 13

What is a fixed-period system?

Accepted Answer

It is a system in wh

Question 14

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

Accepted Answer

All are the same,except for th

Question 15

Service level is:

Accepted Answer

A) the probability of stocking out. 
B) the probability of not stocking out. 
C) something that should be minimized in retail. 
D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage)for single-period models. 
E) B and D 
A) the probability of stocking out. 
B) the probability of not stocking out. 
C) something that should be minimized in retail. 
D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage)for single-period models. 
E) B and D

Question 16

Which of the following is a requirement of Q systems?

Accepted Answer

A) perpetual inventory system 
B) constant order spacing 
C) variable lead time 
D) constant demand 
E) all of the above 
A) perpetual inventory system 
B) constant order spacing 
C) variable lead time 
D) constant demand 
E) all of the above

Question 17

Demand for ice cream at the Ouachita Dairy can be approximated by a normal distribution with a mean of 47 gallons per day and a standard deviation of 8 gallons per day.The new management desires a service level of 95%.Lead time is four days;the dairy is open seven days a week.What reorder point would be consistent with the desired service level?

Accepted Answer

SS = 1.65 × 8 × @#IMG-DLM& = 2

Question 18

Which of these statements about the production order quantity model is FALSE?

Accepted Answer

A) The production order quantity model is appropriate when the assumptions of the basic EOQ model are met,except that receipt is noninstantaneous. 
B) Because receipt is noninstantaneous,some units are used immediately and not stored in inventory. 
C) Average inventory is less than one-half of the production order quantity. 
D) All else equal,the smaller the ratio of demand rate to production rate,the larger is the production order quantity. 
E) None of the above is false. 
A) The production order quantity model is appropriate when the assumptions of the basic EOQ model are met,except that receipt is noninstantaneous. 
B) Because receipt is noninstantaneous,some units are used immediately and not stored in inventory. 
C) Average inventory is less than one-half of the production order quantity. 
D) All else equal,the smaller the ratio of demand rate to production rate,the larger is the production order quantity. 
E) None of the above is false.

Question 19

Which of the following is a function of inventory?

Accepted Answer

A) to decouple various parts of the production process 
B) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand 
C) to take advantage of quantity discounts 
D) to hedge against inflation 
E) All of the above are functions of inventory. 
A) to decouple various parts of the production process 
B) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand 
C) to take advantage of quantity discounts 
D) to hedge against inflation 
E) All of the above are functions of inventory.

Question 20

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

Accepted Answer

The firm should order 250 units at a tim

Exam 12: Inventory Management

Identify the typical cost components that constitute ordering costs in inventory systems.

What is MRO an acronym for? What is the function of MRO inventories?

In the simple EOQ model,if annual demand were to increase,the EOQ would increase proportionately.

Service level is the complement of the probability of a stockout.

The fixed-period inventory model can have a stockout during the review period as well as during the lead time,which is why fixed-period systems require more safety stock than fixed-quantity systems.

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

A specific product has demand during lead time of 100 units,with a standard deviation during lead time of 25 units.What safety stock (approximately)provides a 95% service level?

Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80.They currently have no salvage value.If the stand owner is able to find an outlet that would provide a salvage value of $0.10,what would be the increase in service level?

In the EOQ model,for a given level of demand,annual holding cost is larger as the order quantity is ________.

What is a fixed-period system?

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

Service level is:

Which of the following is a requirement of Q systems?

Which of these statements about the production order quantity model is FALSE?

Which of the following is a function of inventory?

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are D = 600 units,S = $20/order and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

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