Exam 5: Inventory Management

Table 5.3 The Medfield Import Autoparts Company imports and sells standard air filters for most Japanese cars,and it operates under the continuous review system.The average demand for this item is 1200 units per month (14,400 per year),and the standard deviation in monthly demand is 250 units.It costs the company $225 to process each order,and the lead time is 2 months.The holding cost for one unit is $0.50 per year,and the company policy is to maintain a 95 percent cycle-service level.You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.3.What is the EOQ (economic order quantity)for this air filter?

________ inventory is the inventory moving from point to point in the materials flow system.

Which one of the following is NOT a method for tracking inventory and assuring accurate records?

A backorder is an order that cannot be filled at the time the customer places the order,resulting in a lost sale.

________ is the predetermined minimum level that an inventory position must reach before a fixed quantity (Q)is ordered.

Table 5.11 The following information has been collected on an independent demand item: You will need to refer to a normal table to answer the question(s). -Use the information from Table 5.11.Design a periodic review system (P system),with P = 5 weeks.What target inventory T will provide the desired 90 percent cycle-service level?

________ is the number of orders filled completely relative to the total number of orders.

________ inventory is inventory used to absorb uneven rates of demand or supply.

Which one of the following statements regarding the economic order quantity (EOQ)is TRUE?

Demand for an item is 1000 units per week,with a standard deviation in weekly demand of 60 units.The lead time is 2 weeks.The company wants to maintain an 88 percent cycle-service level.Assume demand during lead time to be normally distributed.For a continuous review system,what should be the reorder point? A normal table is attached at the end of this exam.

Holding inventory towards the finished goods level supports lower costs but also results in longer delivery times.

________ inventory is the surplus inventory that a company holds to protect against uncertainties in demand,lead time,and supply.

A company is more likely to place its inventory close to customers as finished goods for standard items than it is for special items.

A stockout is a customer order that cannot be filled when promised or demanded but is filled later.

Perpetual inventory is a system of inventory control in which the inventory records are obsolete.

A(n)________ is a system that allows employees to place orders when inventory visibly reaches a certain marker.

What is generally true about the class A items in ABC analysis? They represent

The reorder point is the measurement of an item's ability to satisfy demand.

An item experiences an annual demand of 7200 units.It costs $8 to hold an item in inventory for one year and $16 to place an order.If the EOQ model is used,what is the time between orders? Assume that there are 52 business weeks in a year.

Wood County Hospital consumed 400 boxes of bandages per week last year.The price of bandages was $80 per box,and the hospital operates 52 weeks per year.The cost of processing an order was $64,and the cost of holding one box throughout a full year was 20 percent of the value of the material. Last year the hospital ordered bandages,on average,once every two weeks,each time ordering 800 boxes.What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied?