Question 1

Discuss the concept of safety stock in a fixed-order quantity system with uncertain demand.

Accepted Answer

Stockouts occur whenever the lead-time d

Question 2

Safety stock inventory is an additional planned on-hand inventory that acts as a buffer to reduce the risk of a stockout.

Accepted Answer

A) True 
 B)False

Question 3

Brenda opens a pool and spa store in a lively shopping mall and finds business to be booming, but she often stocks out of key items customers want. She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems. The 28-ounce bottle of Super Algaecide (SA) is a high margin stock keeping unit (SKU), but it stocks out frequently. Ten SA bottles come in each box, and she orders boxes from a vendor 160 miles away. Brenda is busy running the store and seldom has time to review store inventory status and order the right quantity at the right time. She collects the following data with respect to these SA sales.
$\begin{array} { l l } 
\text { Demand } = 10 \text { boxes per week } & \text { Store operates } 50 \text { weeks } / \text { year } \
\text { Order cost } = \$ 40 / \text { order } & \text { Lead time } = 3 \text { weeks } \
\text { Item cost } = \$ 80 / \text { box } & \text { Std. deviation in weekly demand } = 6 \
\text { Inventory-holding cost } = 15 \% \text { per year } & \text { Service level } = 96 \%
\end{array}$
-If the current order quantity for SA is 20 boxes per order, how much money can she save per year by adopting an economic order quantity (EOQ) ordering policy?

Accepted Answer

A)  Less than $100 
B)  More than $100 but less than or equal to $200 
C)  More than $300 but less than or equal to $400 
D)  More than $400 
A)  Less than $100 
B)  More than $100 but less than or equal to $200 
C)  More than $300 but less than or equal to $400 
D)  More than $400

Question 4

Which of the following is NOT a key assumption underlining the classic economic order quantity (EOQ) model?

Accepted Answer

A)  The entire order quantity arrives in the inventory at one time. 
B)  There are only two types of relevant costs: order/setup and inventory holding. 
C)  Demand is assumed to be stochastic. 
D)  Stockouts are not allowed. 
A)  The entire order quantity arrives in the inventory at one time. 
B)  There are only two types of relevant costs: order/setup and inventory holding. 
C)  Demand is assumed to be stochastic. 
D)  Stockouts are not allowed.

Question 5

Using the data below, find the economic order quantity (EOQ), the total annual cost associated with the economic order quantity, and the reorder point. 
$\begin{array}{|l|l|}
\hline\text { Annual Demand: } & 15,000 \text { units } \
\hline \text { Weeks Operating: } & 52 \text { weeks/year } \
\hline \text { Ordering Costs: } & \$ 60 / \text { order } \\hline \text { Holding Costs: } & \$ 7 / \text { unit/year } \
\hline \text { Lead Time: } & 5 \text { weeks } \
\hline
\end{array}$

Accepted Answer

Q* = Sq. root of (2 * 15000 * 60/7) = 50

Question 6

Brenda opens a pool and spa store in a lively shopping mall and finds business to be booming, but she often stocks out of key items customers want. She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems. The 28-ounce bottle of Super Algaecide (SA) is a high margin stock keeping unit (SKU), but it stocks out frequently. Ten SA bottles come in each box, and she orders boxes from a vendor 160 miles away. Brenda is busy running the store and seldom has time to review store inventory status and order the right quantity at the right time. She collects the following data with respect to these SA sales.
$\begin{array} { l l } 
\text { Demand } = 10 \text { boxes per week } & \text { Store operates } 50 \text { weeks } / \text { year } \
\text { Order cost } = \$ 40 / \text { order } & \text { Lead time } = 3 \text { weeks } \
\text { Item cost } = \$ 80 / \text { box } & \text { Std. deviation in weekly demand } = 6 \
\text { Inventory-holding cost } = 15 \% \text { per year } & \text { Service level } = 96 \%
\end{array}$
-The average number of orders per year using the economic order quantity (EOQ) is:

Accepted Answer

A)  less than 6. 
B)  more than 6 but less than or equal to 8. 
C)  more than 8 but less than or equal to 10. 
D)  more than 12. 
A)  less than 6. 
B)  more than 6 but less than or equal to 8. 
C)  more than 8 but less than or equal to 10. 
D)  more than 12.

Question 7

Given the information below, conduct an ABC analysis and determine which items should be classified as A, B, and C. $\begin{array}{|c|r|r|}
\hline\text { SKU } & \text { Annual Usage } & \text { Item Value (\$) } \
\hline \text { A } & 2,800 & 0.22 \
\hline \mathrm{B} & 300 & 50.00 \
\hline \mathrm{C} & 275 & 11.00 \
\hline \mathrm{D} & 700 & 8.00 \
\hline \mathrm{E} & 45 & 400.00 \
\hline \mathrm{F} & 1,250 & 0.80 \
\hline \mathrm{G} & 2,000 & 0.60 \
\hline
\end{array}$

Accepted Answer

@#IMG-DLM& Based on this information, we

Question 8

Many practical inventory situations include backorders and quantity discounts.

Accepted Answer

A) True 
 B)False

Question 9

Dependent demand, unlike independent demand, needs to be forecasted.

Accepted Answer

A) True 
 B)False

Question 10

A fixed-period (FPS) inventory system:

Accepted Answer

A)  orders a fixed-period quantity when the inventory position reaches or drops below the reorder point (r). 
B)  chooses a replenishment level (M) which includes the demand during the review period and lead time, plus any safety stock. 
C)  maintains a constant order quantity every review period. 
D)  assumes that the demand for an item is constant and continuous, and that the items are withdrawn at a constant rate. 
A)  orders a fixed-period quantity when the inventory position reaches or drops below the reorder point (r). 
B)  chooses a replenishment level (M) which includes the demand during the review period and lead time, plus any safety stock. 
C)  maintains a constant order quantity every review period. 
D)  assumes that the demand for an item is constant and continuous, and that the items are withdrawn at a constant rate.

Question 11

James, the floor manager at a local store of a national home improvement chain evaluates their inventory system. He chooses the patio blocks to be examined as the first item. The historical supply and demand data for this item indicates a constant lead time of 16 days. Demand per day (d) is normally distributed with a mean demand of 2000 per day and standard deviation of 240 per day. He plans to set the service level at 90 percent during lead time.
a.What is the average demand during lead time?
b.What is the amount of safety stock of blocks he should keep on hand?
c.What is the order point he should use?

Accepted Answer

a.@#LAT-DLM&_L = dL = 2000(16) = 32,000

Question 12

Average inventory in the economic order quantity (EOQ) model is defined as:

Accepted Answer

A)  the order quantity divided by the number of inventory cycles per year. 
B)  the annual usage divided by the number of inventory cycles per year. 
C)  one-half of the order quantity. 
D)  one-half of the annual usage. 
A)  the order quantity divided by the number of inventory cycles per year. 
B)  the annual usage divided by the number of inventory cycles per year. 
C)  one-half of the order quantity. 
D)  one-half of the annual usage.

Question 13

What is inventory management and why is it important?

Accepted Answer

Inventory management involves planning,

Question 14

Lead time is the time it takes to prepare an order for shipping to a customer.

Accepted Answer

A) True 
 B)False

Question 15

Explain the difference between a fixed-quantity system and a fixed-period system.

Accepted Answer

In a fixed-quantity system (FQS), the or

Question 16

In ABC analysis, which of the following items typically comprise 60 to 80 percent of total dollar usage but only 10 to 30 percent of the items?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  B and C 
A)  A 
B)  B 
C)  C 
D)  B and C

Question 17

Kelly opens an aquarium store in a lively shopping mall and finds business to be booming, but she often stocks out of key items customers want. She decides to experiment with inventory control methods such as using a fixed order quantity (FQS) and/or fixed order period (FPS) systems. The Fluval 303 pump, a high margin and profitable pump, is one of her best sellers, but it stocks out frequently. She collects the following data about the pump's sales.
$\begin{array} { l l } 
\text { Demand } = 10 \text { units per week } & \text { Store operates } 45 \text { weeks } / \text { year } \
\text { Order cost } = \$ 30 / \text { order } & \text { Lead time } = 3 \text { weeks } \
\text { Item cost } = \$ 80 / \text { pump } & \text { Standard deviation of weekly demand } = 4 \text { units } \
\text { Inventory-holding cost } = 15 \% \text { per year } & \text { Desired service level } = 90 \text { percent }
\end{array}$
-If the current order quantity used by Kelly is 20 pumps per order, how much money can she save by adopting an economic order quantity (EOQ) policy?

Accepted Answer

A)  Less than $50 
B)  More than $50 but less than or equal to $100 
C)  More than $100 but less than or equal to $150 
D)  more than $150 
A)  Less than $50 
B)  More than $50 but less than or equal to $100 
C)  More than $100 but less than or equal to $150 
D)  more than $150

Question 18

Costs associated with backordering products are called _____ costs.

Accepted Answer

A)  holding 
B)  shortage 
C)  ordering 
D)  setup 
A)  holding 
B)  shortage 
C)  ordering 
D)  setup

Question 19

Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.

Accepted Answer

The characteristics management

Question 20

Which of the following statements is TRUE?

Accepted Answer

A)  The level of safety stock maintained decreases when the desired cycle service level increases. 
B)  The level of safety stock maintained decreases when the standard deviation of demand during lead time increases. 
C)  In a fixed-period inventory system, the value of Q is kept the same from one cycle to another. 
D)  In a fixed-order-quantity system, the reorder point is the average demand during the lead time, plus the additional safety stock when demand is uncertain. 
A)  The level of safety stock maintained decreases when the desired cycle service level increases. 
B)  The level of safety stock maintained decreases when the standard deviation of demand during lead time increases. 
C)  In a fixed-period inventory system, the value of Q is kept the same from one cycle to another. 
D)  In a fixed-order-quantity system, the reorder point is the average demand during the lead time, plus the additional safety stock when demand is uncertain.

Discuss the concept of safety stock in a fixed-order quantity system with uncertain demand.

Safety stock inventory is an additional planned on-hand inventory that acts as a buffer to reduce the risk of a stockout.

Which of the following is NOT a key assumption underlining the classic economic order quantity (EOQ) model?

Using the data below, find the economic order quantity (EOQ), the total annual cost associated with the economic order quantity, and the reorder point. Annual Demand: 15,000 units Weeks Operating: 52 weeks/year Ordering Costs: \ 60/ order Holding Costs: \ 7/ unit/year Lead Time: 5 weeks

Many practical inventory situations include backorders and quantity discounts.

Dependent demand, unlike independent demand, needs to be forecasted.

A fixed-period (FPS) inventory system:

Average inventory in the economic order quantity (EOQ) model is defined as:

What is inventory management and why is it important?

Lead time is the time it takes to prepare an order for shipping to a customer.

Explain the difference between a fixed-quantity system and a fixed-period system.

In ABC analysis, which of the following items typically comprise 60 to 80 percent of total dollar usage but only 10 to 30 percent of the items?

Costs associated with backordering products are called _____ costs.

Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.

Which of the following statements is TRUE?

Goods, Services, and Operations Management

Value Chains

Measuring Performance in Operations

Operations Strategy

Technology and Operations Management

Goods and Service Design

Process Selection, Design, and Analysis

Facility and Work Designs

Supply Chain Design

Capacity Management

Forecasting and Demand Planning

Resource Management

Operations Scheduling and Sequencing

Quality Management

Appendix: Quality Management

Quality Control and Spc

Appendix: Queuing Analysis

Appendix: Modeling Using Linear Programming

Lean Operating Systems

Appendix: Simulation

Project Management

Appendix: Decision Analysis

Filters

Exam 12: Managing Inventories

Discuss the concept of safety stock in a fixed-order quantity system with uncertain demand.

Safety stock inventory is an additional planned on-hand inventory that acts as a buffer to reduce the risk of a stockout.

Which of the following is NOT a key assumption underlining the classic economic order quantity (EOQ) model?

Using the data below, find the economic order quantity (EOQ), the total annual cost associated with the economic order quantity, and the reorder point. Annual Demand: 15,000 units Weeks Operating: 52 weeks/year Ordering Costs: \ 60/ order Holding Costs: \ 7/ unit/year Lead Time: 5 weeks

Many practical inventory situations include backorders and quantity discounts.

Dependent demand, unlike independent demand, needs to be forecasted.

A fixed-period (FPS) inventory system:

Average inventory in the economic order quantity (EOQ) model is defined as:

What is inventory management and why is it important?

Lead time is the time it takes to prepare an order for shipping to a customer.

Explain the difference between a fixed-quantity system and a fixed-period system.

In ABC analysis, which of the following items typically comprise 60 to 80 percent of total dollar usage but only 10 to 30 percent of the items?

Costs associated with backordering products are called _____ costs.

Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.

Which of the following statements is TRUE?

Goods, Services, and Operations Management

Value Chains

Measuring Performance in Operations

Operations Strategy

Technology and Operations Management

Goods and Service Design

Process Selection, Design, and Analysis

Facility and Work Designs

Supply Chain Design

Capacity Management

Forecasting and Demand Planning

Resource Management

Operations Scheduling and Sequencing

Quality Management

Appendix: Quality Management

Quality Control and Spc

Appendix: Queuing Analysis

Appendix: Modeling Using Linear Programming

Lean Operating Systems

Appendix: Simulation

Project Management

Appendix: Decision Analysis

Filters