Question 1

Which of the following are NOT often associated with a vendor-managed inventory (VMI) arrangements?

Accepted Answer

A) Long-term commitments from both parties. 
B) Supplier representative located at the customer site. 
C) Customers recommend to suppliers how they should schedule production. 
D) Supplier places replenishment orders. 
E) All of these are typically associated with VMI. 
A) Long-term commitments from both parties. 
B) Supplier representative located at the customer site. 
C) Customers recommend to suppliers how they should schedule production. 
D) Supplier places replenishment orders. 
E) All of these are typically associated with VMI.

Question 2

Johnson Manufacturing has decided to consolidate its warehouses and reduce the number of locations from 12 to four. However, Johnson desires to maintain the same service level in terms of the risks of running out of stock in attempting to meet customer demand. As a result, Johnson can expect that:

Accepted Answer

A) The time to fill customer orders will decrease. 
B) The required safety stock will increase by approximately 73 percent. 
C) The required safety stock will decline by approximately 42 percent. 
D) The required safety stock will decline by approximately 58 percent. 
A) The time to fill customer orders will decrease. 
B) The required safety stock will increase by approximately 73 percent. 
C) The required safety stock will decline by approximately 42 percent. 
D) The required safety stock will decline by approximately 58 percent.

Question 3

Which of the following might a company try to do to reduce the total amount of safety stock it holds?

Accepted Answer

A)  Implement and use ABC analysis of inventory items. 
B)  Attempt to reduce variation in supplier lead times. 
C)  Implement demand management approaches. 
D)  A and B. 
E)  All of these. 
A)  Implement and use ABC analysis of inventory items. 
B)  Attempt to reduce variation in supplier lead times. 
C)  Implement demand management approaches. 
D)  A and B. 
E)  All of these.

Question 4

Safety stock exists for which of the following reasons?

Accepted Answer

A) To allow less expensive purchases by buying more. 
B) To allow for transportation time. 
C) To provide protection against the uncertainties of supply and demand. 
D) None of these. 
A) To allow less expensive purchases by buying more. 
B) To allow for transportation time. 
C) To provide protection against the uncertainties of supply and demand. 
D) None of these.

Question 5

John Jones of Jones Corporation determined that the cost related to processing an invoice from a supplier was approximately $100 per invoice. This cost is an example of:

Accepted Answer

A) Inventory holding (or carrying) cost. 
B) Inventory investment. 
C) Wasted expense. 
D) Order cost. 
A) Inventory holding (or carrying) cost. 
B) Inventory investment. 
C) Wasted expense. 
D) Order cost.

Question 6

A company has average demand of 30 units per day. Lead time from the supplier averages 7 days. Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units. One unit costs $10 and the inventory carrying cost is 25 percent.   What is the reorder point for the company if it decides on a 99 percent service level?

Accepted Answer

A) 243 units 
B) 257 units 
C) 77 units 
D) 210 units 
A) 243 units 
B) 257 units 
C) 77 units 
D) 210 units

Question 7

Bill's Food Emporium uses the periodic system to order cans of Cajun seasoning every 30 days. It typically takes the supplier 10 days to resupply Bill. Sales average 8 units per day with a standard deviation of 2 units per day. Bill does not carry any safety stock of Cajun seasoning. If he runs out for a period of time, he doesn't care. Bill just counted his inventory of Cajun seasoning and found 22 cans on the shelf. How many cans should Bill order?

Accepted Answer

A) 342 
B) 218 
C) 262 
D) 298 
A) 342 
B) 218 
C) 262 
D) 298

Question 8

Taxes and insurance costs are an example of which of the following costs?

Accepted Answer

A) Ordering cost. 
B) Governmental costs. 
C) Carrying (or holding) costs. 
D) None of these. 
A) Ordering cost. 
B) Governmental costs. 
C) Carrying (or holding) costs. 
D) None of these.

Question 9

When small changes generated by a customer produce progressively larger changes at each stage upstream in the supply chain, this is known as:

Accepted Answer

A) Buffering. 
B) Bullwhip effect. 
C) Pareto effect. 
D) Vendor managed inventory. 
A) Buffering. 
B) Bullwhip effect. 
C) Pareto effect. 
D) Vendor managed inventory.

Question 10

Johnson Company had beginning inventory of $1,000,000 and ending inventory of $1,200,000. Johnson has determined inventory carrying cost to be 25 percent. Johnson's inventory carrying cost was:

Accepted Answer

A) $250,000. 
B) $275,000. 
C) $300,000. 
D) None of these. 
A) $250,000. 
B) $275,000. 
C) $300,000. 
D) None of these.

Question 11

Next year a tire company wants to have an inventory turnover rate of 22 times per year. To achieve this turnover rate, what should be the average number of days of supply?

Accepted Answer

A) 16.6 days 
B) 36 days 
C) 0.6 days 
D) 22 days 
A) 16.6 days 
B) 36 days 
C) 0.6 days 
D) 22 days

Question 12

If beginning inventory is $1,000,000, ending inventory is $1,400,000, sales are $10,000,000, and anticipated sales are $50,000 per day, what is the days of supply?

Accepted Answer

A) 28 days 
B) 70 days 
C) 60 days 
D) 32 days 
A) 28 days 
B) 70 days 
C) 60 days 
D) 32 days

Question 13

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.   The lowest total annual acquisition cost for Book Store quantity is closest to (Due to possible differences in rounding, choose the closest answer.):

Accepted Answer

A) $16,018,000 
B) $16,018,708 
C) $17,518,707 
D) $16,258,000 
A) $16,018,000 
B) $16,018,708 
C) $17,518,707 
D) $16,258,000

Question 14

A batch of Raisin Bran that has been made at Kellogg's but not yet packaged in its final cereal box would be an example of what type of inventory?

Accepted Answer

A) Raw material 
B) Work-in-process 
C) Finished goods 
D) Maintenance, repair, and operating supplies (MRO) 
A) Raw material 
B) Work-in-process 
C) Finished goods 
D) Maintenance, repair, and operating supplies (MRO)

Question 15

The ABC analysis used for analyzing inventory is an example of:

Accepted Answer

A) Safety stock calculation. 
B) Regression analysis. 
C) Pareto's Law. 
D) Inventory carrying cost. 
A) Safety stock calculation. 
B) Regression analysis. 
C) Pareto's Law. 
D) Inventory carrying cost.

Question 16

Jones Manufacturing Inc. purchases a component from a Chilean supplier. The demand for that component is exactly 70 units each day. The company is open for business 250 days each year. When the company reorders the product, the lead time from the supplier is exactly 10 days. The product costs $14.00. The company determined that its inventory carrying cost is 20 percent. The company's order cost is $30.00. If the company decides to order 1,750 units each time it places an order, what will be the total annual cost of this policy? (Do not include the product cost in your answer.)

Accepted Answer

A) $1,500 
B) $2,400 
C) $2,750 
D) $3,400 
A) $1,500 
B) $2,400 
C) $2,750 
D) $3,400

Question 17

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 EOQ if HighLife pays $45/unit? Due to possible differences in rounding, choose the closest answer.

Accepted Answer

A) 287 
B) 300 
C) 365 
D) 398 
A) 287 
B) 300 
C) 365 
D) 398

Question 18

Alpha Company places 10 orders per year with its supplier. Each order is for an amount exactly equal to the EOQ. Alpha's order cost has been determined to be $50 per order. Alpha carries no safety stock at all. What is Alpha's annual inventory carrying cost?

Accepted Answer

A) Cannot be determined without further information 
B) $50 
C) $250 
D) $500 
A) Cannot be determined without further information 
B) $50 
C) $250 
D) $500

Question 19

A company has average demand of 30 units per day. Lead time from the supplier averages 7 days. Assume that the combined standard deviation of demand during lead time has been calculated and is equal to 20 units. One unit costs $10 and the inventory carrying cost is 25 percent.   Suppose management decides it wants to offer a 95 percent service level. That is, it is willing to experience a stockout probability of 5 percent during the order cycle. What is the annual cost of this safety stock policy?

Accepted Answer

A) $82.50 
B) $87.50 
C) $115.00 
D) $62.50 
A) $82.50 
B) $87.50 
C) $115.00 
D) $62.50

Question 20

Blue Star Co. has been using the production order quantity inventory model. If annual demand, daily demand, and the production rate increase to four times their original amounts, which of the following is/are possible consequence(s)?

Accepted Answer

A) The order quantity will double. 
B) The order quantity will increase by four times. 
C) The order quantity will be cut in half. 
D) There is no impact on order quantity. 
A) The order quantity will double. 
B) The order quantity will increase by four times. 
C) The order quantity will be cut in half. 
D) There is no impact on order quantity.

Which of the following are NOT often associated with a vendor-managed inventory (VMI) arrangements?

Johnson Manufacturing has decided to consolidate its warehouses and reduce the number of locations from 12 to four. However, Johnson desires to maintain the same service level in terms of the risks of running out of stock in attempting to meet customer demand. As a result, Johnson can expect that:

Which of the following might a company try to do to reduce the total amount of safety stock it holds?

Safety stock exists for which of the following reasons?

John Jones of Jones Corporation determined that the cost related to processing an invoice from a supplier was approximately $100 per invoice. This cost is an example of:

Taxes and insurance costs are an example of which of the following costs?

When small changes generated by a customer produce progressively larger changes at each stage upstream in the supply chain, this is known as:

Johnson Company had beginning inventory of $1,000,000 and ending inventory of $1,200,000. Johnson has determined inventory carrying cost to be 25 percent. Johnson's inventory carrying cost was:

Next year a tire company wants to have an inventory turnover rate of 22 times per year. To achieve this turnover rate, what should be the average number of days of supply?

If beginning inventory is $1,000,000, ending inventory is $1,400,000, sales are $10,000,000, and anticipated sales are $50,000 per day, what is the days of supply?

A batch of Raisin Bran that has been made at Kellogg's but not yet packaged in its final cereal box would be an example of what type of inventory?

The ABC analysis used for analyzing inventory is an example of:

Alpha Company places 10 orders per year with its supplier. Each order is for an amount exactly equal to the EOQ. Alpha's order cost has been determined to be $50 per order. Alpha carries no safety stock at all. What is Alpha's annual inventory carrying cost?

Blue Star Co. has been using the production order quantity inventory model. If annual demand, daily demand, and the production rate increase to four times their original amounts, which of the following is/are possible consequence(s)?

Introduction to Managing Operations Across the Supply Chain

Operations and Supply Chain Strategy

Managing Processes and Capacity

Extension: Process Mapping and Analysis

Productprocess Innovation

Manufacturing and Service Process Structures

Managing Quality

Extension: Quality Improvement Tools

Lean Systems

Customer Service Management

Sourcing and Supply Management

Logistics Management

Demand Planning: Forecasting and Demand Management

Sales and Operations Planning

Materials and Resource Requirements Planning

Project Management

Extension: Advanced Methods for Project Scheduling

Sustainable Operations Managementpreparing for the Future

Filters

Exam 7: Managing Inventories

Which of the following are NOT often associated with a vendor-managed inventory (VMI) arrangements?

Johnson Manufacturing has decided to consolidate its warehouses and reduce the number of locations from 12 to four. However, Johnson desires to maintain the same service level in terms of the risks of running out of stock in attempting to meet customer demand. As a result, Johnson can expect that:

Which of the following might a company try to do to reduce the total amount of safety stock it holds?

Safety stock exists for which of the following reasons?

John Jones of Jones Corporation determined that the cost related to processing an invoice from a supplier was approximately $100 per invoice. This cost is an example of:

Taxes and insurance costs are an example of which of the following costs?

When small changes generated by a customer produce progressively larger changes at each stage upstream in the supply chain, this is known as:

Johnson Company had beginning inventory of $1,000,000 and ending inventory of $1,200,000. Johnson has determined inventory carrying cost to be 25 percent. Johnson's inventory carrying cost was:

Next year a tire company wants to have an inventory turnover rate of 22 times per year. To achieve this turnover rate, what should be the average number of days of supply?

If beginning inventory is $1,000,000, ending inventory is $1,400,000, sales are $10,000,000, and anticipated sales are $50,000 per day, what is the days of supply?

A batch of Raisin Bran that has been made at Kellogg's but not yet packaged in its final cereal box would be an example of what type of inventory?

The ABC analysis used for analyzing inventory is an example of:

Alpha Company places 10 orders per year with its supplier. Each order is for an amount exactly equal to the EOQ. Alpha's order cost has been determined to be $50 per order. Alpha carries no safety stock at all. What is Alpha's annual inventory carrying cost?

Blue Star Co. has been using the production order quantity inventory model. If annual demand, daily demand, and the production rate increase to four times their original amounts, which of the following is/are possible consequence(s)?

Introduction to Managing Operations Across the Supply Chain

Operations and Supply Chain Strategy

Managing Processes and Capacity

Extension: Process Mapping and Analysis

Productprocess Innovation

Manufacturing and Service Process Structures

Managing Quality

Extension: Quality Improvement Tools

Lean Systems

Customer Service Management

Sourcing and Supply Management

Logistics Management

Demand Planning: Forecasting and Demand Management

Sales and Operations Planning

Materials and Resource Requirements Planning

Project Management

Extension: Advanced Methods for Project Scheduling

Sustainable Operations Managementpreparing for the Future

Filters