Question 1

ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

Accepted Answer

A) True 
 B)False  False

Question 2

In an economic order quantity problem, the total annual cost curve is at its __________ where holding costs equal setup costs.

Accepted Answer

minimum

Question 3

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

Accepted Answer

A)  $400 
B)  $800 
C)  $1200 
D)  Zero; this is a class C item. 
E)  Cannot be determined because unit price is not known. 
A)  $400 
B)  $800 
C)  $1200 
D)  Zero; this is a class C item. 
E)  Cannot be determined because unit price is not known. B

Question 4

Demand for a product is approximately normal, averaging 5 units per day with a standard deviation of 1 unit per day. Lead time for this product is approximately normal, averaging 10 days with a standard deviation of 3 days. What reorder point provides a service level of 90 percent?

Accepted Answer

This problem requires formula (12-17), s

Question 5

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

Accepted Answer

Typical components of ordering

Question 6

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 inventory cost (rounded to nearest dollar) of the optimal behavior in this problem?

Accepted Answer

(a) @#LAT-DLM& or 7289 units.

(b) It will take ap

Question 7

The Rushton Trash Company stocks, among many other products, a certain container, each of which occupies four square feet of warehouse space. The warehouse space currently available for storing this product is limited to 600 square feet. Demand for the product is 15,000 units per year. Holding costs are $4 per container per year; Ordering costs are $5 per order.
a. What is the cost-minimizing order quantity decision for Rushton?
b. What is the total inventory-related cost of this decision?
c. What is the total inventory-related cost of managing the inventory of this product, when the limited amount of warehouse space is taken into account?
d. What would the firm be willing to pay for additional warehouse space?

Accepted Answer

The warehouse will hold only 150 contain

Question 8

The soft goods department of a large department store sells 175 units per month of a certain large bath towel. The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00. The store uses an inventory carrying charge of 27% per year. Determine the optimal order quantity, order frequency, and the annual cost of inventory management. If, through automation of the purchasing process, the ordering cost can be cut to $4.00, what will be the new economic order quantity, order frequency, and annual inventory management cost?
 Explain these results.

Accepted Answer

Annual demand is 175 x 12 = 2100. At S=$

Question 9

What is cycle counting?

Accepted Answer

Cycle counting is an

Question 10

Describe the difference between a fixed-quantity and a fixed-period inventory system?

Accepted Answer

In a fixed-quantity inventory system, wh

Question 11

A product has variable demand and constant lead time. Currently this product is managed by a fixed-period inventory system, for which the review period is one week. Lead time is four weeks. Annually about 5,200 units of this product are sold. The current target inventory is 500 units. Today is review day; 75 units are on the shelves, and orders placed at previous reviews in the amount of 110, 60, and 30 have not yet been received. There are no backorders.
a. How much is the firm allowing for safety stock in this case?
b. What should be the order amount this week?

Accepted Answer

(a) Since demand averages 100 units per

Question 12

A firm that makes electronic circuits has been ordering a certain raw material 250 ounces at a time. The firm estimates that carrying cost is 30% per year, and that ordering cost is about $20 per order. The current price of the ingredient is $200 per ounce. The assumptions of the basic EOQ model are thought to apply. For what value of annual demand is their action optimal?

Accepted Answer

This problem reverses the unkn

Question 13

Which of the following statements regarding the production order quantity model is true?

Accepted Answer

A)  It applies only to items produced in the firm's own production departments. 
B)  It relaxes the assumption that all the order quantity is received at one time. 
C)  It relaxes the assumption that the demand rate is constant. 
D)  It minimizes the total production costs. 
E)  It minimizes inventory. 
A)  It applies only to items produced in the firm's own production departments. 
B)  It relaxes the assumption that all the order quantity is received at one time. 
C)  It relaxes the assumption that the demand rate is constant. 
D)  It minimizes the total production costs. 
E)  It minimizes inventory.

Question 14

Service level is

Accepted Answer

A)  the chance of stocking out 
B)  the chance 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 overage + the cost of shortage) for single- period models 
E)  B and D 
A)  the chance of stocking out 
B)  the chance 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 overage + the cost of shortage) for single- period models 
E)  B and D

Question 15

Cycle counting is an inventory control technique exclusively used for cyclical items.

Accepted Answer

A) True 
 B)False

Question 16

In the production order quantity (POQ) model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a larger lot size than in an otherwise identical EOQ problem.

Accepted Answer

A) True 
 B)False

Question 17

Describe ABC inventory analysis in one sentence. What are some policies that may be based upon the results of an ABC analysis?

Accepted Answer

ABC inventory analysis is a method for d

Question 18

__________ is the complement of the probability of a stockout.

Accepted Answer

The answer of __________ is the complement of the probability...

Question 19

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days. Demand during this period averages 100 units per day. What would be an appropriate re-order point?

Accepted Answer

Re-order point = dem

Question 20

ABC analysis is based upon the principle that

Accepted Answer

A)  all items in inventory must be monitored very closely 
B)  there are usually a few critical items, and many items which are less critical 
C)  an item is critical if its usage is high 
D)  more time should be spent on class "C" items because there are more of them 
E)  as with grade distributions in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items 
A)  all items in inventory must be monitored very closely 
B)  there are usually a few critical items, and many items which are less critical 
C)  an item is critical if its usage is high 
D)  more time should be spent on class "C" items because there are more of them 
E)  as with grade distributions in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items

Exam 15: Inventory Management

ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

In an economic order quantity problem, the total annual cost curve is at its __________ where holding costs equal setup costs.

A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost __________ per year in total annual inventory costs.

Demand for a product is approximately normal, averaging 5 units per day with a standard deviation of 1 unit per day. Lead time for this product is approximately normal, averaging 10 days with a standard deviation of 3 days. What reorder point provides a service level of 90 percent?

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

What is cycle counting?

Describe the difference between a fixed-quantity and a fixed-period inventory system?

Which of the following statements regarding the production order quantity model is true?

Service level is

Cycle counting is an inventory control technique exclusively used for cyclical items.

In the production order quantity (POQ) model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a larger lot size than in an otherwise identical EOQ problem.

Describe ABC inventory analysis in one sentence. What are some policies that may be based upon the results of an ABC analysis?

__________ is the complement of the probability of a stockout.

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days. Demand during this period averages 100 units per day. What would be an appropriate re-order point?

ABC analysis is based upon the principle that

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