Exam 7: Managing Inventories

Jones Company has calculated that the EOQ for a particular item is 1,000 units. However, Jones does not have enough capital to order that many units each time, so it only orders 250 units at a time. This will result in:

Jasper's Grocery places an order for Monster every 15 days. Once the order is placed, delivery to the store typically occurs in 3 days. Average demand is 5 cases per day, and the standard deviation of demand is 1.5 cases per day. The store policy is to stock an amount of inventory that allows for an average stockout condition of 5 percent (1.65 standard deviations) while waiting for replenishment. It is time to place an order, and there are 20 cases on hand. How many units should be ordered?

A company recently lowered its service performance from 99 percent product availability to 97 percent product availability. The change saved the company exactly $1 million per year in inventory carrying cost. Senior management now wants to lower the service level to 95 percent from 97 percent. Such a further change is likely to save:

Natalie's Cabinets makes cabinets at an average cost of $2,000. Last year, Natalie sold 5,000 units of the cabinets and had an annual turnover rate of 4 times. Natalie has estimated her inventory carrying cost to be 25 percent. What was Natalie's annual inventory carrying cost?

Which of the following pieces of information is identified in the original 12-digit UPC code?

Alpha Company places 10 orders per year with its supplier. Each order is for an amount exactly equal to the EOQ. Alpha has determined its annual inventory carrying cost is $2,000. Alpha carries no safety stock at all. What is Alpha's order cost per order?

University Book Store buys women's polo T-shirts from a supplier according to the price schedule shown below. The store sells 500,000 T-shirts each year. The annual carrying cost of T-shirts is 25 percent, and the ordering cost is $40. What order quantity would give the Book Store the lowest total acquisition cost? (Due to possible differences in rounding, choose the closest answer.)

Bryson Carpet Mills produces a variety of different carpets. Changing from production of one carpet to another involves a setup cost of $500. One particular carpet costs $8/yard to produce. Annual demand for this style is 50,000 yards. Bryson Mills produces carpet 200 days per year. The production process is most efficient when 2,000 yards/day are produced. Inventory carrying cost is estimated at 20 percent annually. What should be the production order quantity?

Which of the following is NOT a role of inventory?

Ball Corporation sells aluminum cans to Anheuser-Busch to use in making six-packs of Budweiser. Anheuser-Busch has a warehouse located at its plant in St. Louis which contains boxes of empty cans received from Ball. From Anheuser-Busch's perspective, the cans in this warehouse represent:

Independent demand inventory models can be used to determine:

HighLife Corporation has the following information: Average demand = 30 units per day Average lead time = 40 days Item unit cost = $45 for orders of less than 400 units Item unit cost = $40 for orders of 400 units or more Ordering cost = $50 Inventory carrying cost = 15 percent The business year is 300 days.Standard deviation of demand during lead time = 90 Desired service level = 95 percent What is the TAC at $40/unit closest to?

At each of its home games, the Washington Check-Kiters football team sells programs that give statistics of the teams involved in the current game's contest. Since each game brings a different visiting team, a program is only of value for one contest, and no returns will be accepted by the supplier. On a per-program basis, the selling price is twice the cost. The target service level that will yield the most profits is:

What might a company do to reduce the amount of cycle stock it holds?

You have a one-time opportunity to buy an item. It costs $20 and sells for $50. It has $4 salvage value if it does not sell. What is the target service level?

When calculating a reorder point (ROP), which of the following factors WOULD NOT affect the calculation?

Which of the following statements is true regarding a periodic review inventory system?

Suppose demand is 45 units a month, average inventory is 60 units, and unit cost is $20. What is the annual inventory turnover?

___________ inventory is the costliest form of inventory one can hold.

HighLife Corporation has the following information: Average demand = 30 units per day Average lead time = 40 days Item unit cost = $45 for orders of less than 400 units Item unit cost = $40 for orders of 400 units or more Ordering cost = $50 Inventory carrying cost = 15 percent The business year is 300 days.Standard deviation of demand during lead time = 90 Desired service level = 95 percent What is the safety stock that HighLife Corporation should carry for its desired service level of 95 percent? 1)28 standard deviations cover 90 percent 1)65 standard deviations cover 95 percent 1)96 standard deviations cover 97.5 percent