Question 1

If the standard deviation of demand is six per week,demand is 50 per week,and the desired service level is 95%,approximately what is the statistical safety stock?

Accepted Answer

A) 8 units 
B) 10 units 
C) 16 units 
D) 64 units 
E) Cannot be determined without lead time data. 
A) 8 units 
B) 10 units 
C) 16 units 
D) 64 units 
E) Cannot be determined without lead time data. E

Question 2

A product has a 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 (holding and setup)costs.

Accepted Answer

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

Question 3

Montegut Manufacturing produces a product for which the annual demand is 10,000 units.Production averages 100 units per day,while demand is 40 units per day.Holding costs are $2.00 per unit per year,and setup cost is $200.00.(a)If the firm wishes to produce this product in economic batches,what size batch should be used? (b)What is the maximum inventory level? (c)How many order cycles are there per year? (d)What are the total annual holding and setup costs?

Accepted Answer

This is a production order quantity problem.
(a)Q*p =   =   = 1825.7 or 1826 units
(b)The maximum inventory level is Q   = 1825.7   = 1095.45 or 1095 units
(c)There are approximately N =   =   = 5.48 cycles per year
(d)Total annual costs = (5.48)($200)+ (1095.45/2)$2 = $2,190.89 or $2,191

Question 4

All EXCEPT which of the following statements about ABC analysis are true?

Accepted Answer

A) In ABC analysis,inventory may be categorized by measures other than dollar volume. 
B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. 
C) ABC analysis is an application of the Pareto principle. 
D) ABC analysis suggests that all items require the same high degree of control. 
E) ABC analysis suggests that there are the critical few and the trivial many inventory items. 
A) In ABC analysis,inventory may be categorized by measures other than dollar volume. 
B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. 
C) ABC analysis is an application of the Pareto principle. 
D) ABC analysis suggests that all items require the same high degree of control. 
E) ABC analysis suggests that there are the critical few and the trivial many inventory items.

Question 5

Demand for a product is relatively constant at five units per day.Lead time for this product is normally distributed with a mean of ten days and a standard deviation of three days.
(a)What reorder point provides a 50 percent service level?
(b)What reorder point provides a 90 percent service level?
(c)If the lead time standard deviation can be reduced from 3 days to 1,what reorder point now provides 90 percent service? How much is safety stock reduced by this change?

Accepted Answer

This problem requires formula 12-16 sinc

Question 6

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units,setup cost is $50,holding cost is $12 per unit per year,the daily demand rate is 10 and the daily production rate is 100.What is the production order quantity for this problem?

Accepted Answer

A) 139 
B) 174 
C) 184 
D) 365 
E) 548 
A) 139 
B) 174 
C) 184 
D) 365 
E) 548

Question 7

A specific product has demand during lead time of 100 units,with a standard deviation during lead time of 25 units.What safety stock (approximately)provides a 95% service level?

Accepted Answer

A) 41 
B) 55 
C) 133 
D) 140 
E) 165 
A) 41 
B) 55 
C) 133 
D) 140 
E) 165

Question 8

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

Accepted Answer

The answer of In an economic order quantity problem,the total...

Question 9

If daily demand is normally distributed with a mean of 15 and standard deviation of 5,and lead time is constant at 4 days,a 90 percent service level will require how much safety stock?

Accepted Answer

A) 7 units 
B) 10 units 
C) 13 units 
D) 16 units 
E) 26 units 
A) 7 units 
B) 10 units 
C) 13 units 
D) 16 units 
E) 26 units

Question 10

Demand for dishwasher water pumps is 8 per day.The standard deviation of demand is 3 per day,and the order lead time is four days.The service level is 95%.What should the reorder point be?

Accepted Answer

A) about 18 
B) about 24 
C) about 32 
D) about 38 
E) more than 40 
A) about 18 
B) about 24 
C) about 32 
D) about 38 
E) more than 40

Question 11

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

Accepted Answer

All are the same,except for th

Question 12

Among the advantages of cycle counting is that it:

Accepted Answer

A) makes the annual physical inventory more acceptable to management. 
B) does not require the detailed records necessary when annual physical inventory is used. 
C) does not require highly trained people. 
D) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. 
E) does not need to be performed for less expensive items. 
A) makes the annual physical inventory more acceptable to management. 
B) does not require the detailed records necessary when annual physical inventory is used. 
C) does not require highly trained people. 
D) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. 
E) does not need to be performed for less expensive items.

Question 13

Which of the following statements about the basic EOQ model is FALSE?

Accepted Answer

A) If the setup cost were to decrease,the EOQ would fall. 
B) If annual demand were to double,the number of orders per year would increase. 
C) If the ordering cost were to increase,the EOQ would rise. 
D) If annual demand were to double,the EOQ would also double. 
E) All of the above statements are true. 
A) If the setup cost were to decrease,the EOQ would fall. 
B) If annual demand were to double,the number of orders per year would increase. 
C) If the ordering cost were to increase,the EOQ would rise. 
D) If annual demand were to double,the EOQ would also double. 
E) All of the above statements are true.

Question 14

What is a fixed-period system?

Accepted Answer

It is a system in wh

Question 15

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are   ,   and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

Accepted Answer

STEP 1: EOQ at $4.10 = 139.69 → infeasib

Question 16

________ is extra stock that is carried to serve as a buffer.

Accepted Answer

The answer of ________ is extra stock that is carried...

Question 17

Identify the typical components that constitute inventory holding or carrying costs.

Accepted Answer

Typical components of inventor

Question 18

In the production order quantity model,the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Accepted Answer

demand rat

Question 19

Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80.They currently have no salvage value.If the stand owner is able to find an outlet that would provide a salvage value of $0.10,what would be the increase in service level?

Accepted Answer

A) .5 
B) 0 
C) .07 
D) 1 
E) unable to determine given only the above information 
A) .5 
B) 0 
C) .07 
D) 1 
E) unable to determine given only the above information

Question 20

Explain what "decoupling" means in the context of inventory management.

Accepted Answer

Decoupling means to separate v

Exam 12: Inventory Management

If the standard deviation of demand is six per week,demand is 50 per week,and the desired service level is 95%,approximately what is the statistical safety stock?

A product has a 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 (holding and setup)costs.

All EXCEPT which of the following statements about ABC analysis are true?

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units,setup cost is $50,holding cost is $12 per unit per year,the daily demand rate is 10 and the daily production rate is 100.What is the production order quantity for this problem?

A specific product has demand during lead time of 100 units,with a standard deviation during lead time of 25 units.What safety stock (approximately)provides a 95% service level?

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

If daily demand is normally distributed with a mean of 15 and standard deviation of 5,and lead time is constant at 4 days,a 90 percent service level will require how much safety stock?

Demand for dishwasher water pumps is 8 per day.The standard deviation of demand is 3 per day,and the order lead time is four days.The service level is 95%.What should the reorder point be?

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

Among the advantages of cycle counting is that it:

Which of the following statements about the basic EOQ model is FALSE?

What is a fixed-period system?

The annual demand,ordering cost,and the annual inventory carrying cost rate for a certain item are , and I = 30% of item price.Price is established by the following quantity discount schedule.What should the order quantity be in order to minimize the total annual cost?

________ is extra stock that is carried to serve as a buffer.

Identify the typical components that constitute inventory holding or carrying costs.

In the production order quantity model,the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80.They currently have no salvage value.If the stand owner is able to find an outlet that would provide a salvage value of $0.10,what would be the increase in service level?

Explain what "decoupling" means in the context of inventory management.

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