Question 1

In the simple EOQ model,if the carrying cost were to double,the EOQ would also double.

Accepted Answer

A) True 
 B)False

Question 2

What is cycle counting?

Accepted Answer

Cycle counting is a

Question 3

In the basic EOQ model,if the cost of placing an order doubles,and all other values remain constant,the EOQ will:

Accepted Answer

A) increase by about 41%. 
B) increase by 100%. 
C) increase by 200%. 
D) increase,but more data is needed to say by how much. 
E) either increase or decrease. 
A) increase by about 41%. 
B) increase by 100%. 
C) increase by 200%. 
D) increase,but more data is needed to say by how much. 
E) either increase or decrease.

Question 4

Which of the following statements regarding Amazon.com is FALSE?

Accepted Answer

A) The company was opened by Jeff Bezos in 1995. 
B) The company was founded as,and still is,a "virtual" retailer with no inventory. 
C) The company is now a world-class leader in warehouse automation and management. 
D) The company uses both United Parcel Service and the U.S.Postal Service as shippers. 
E) Amazon obtains its competitive advantage through inventory management. 
A) The company was opened by Jeff Bezos in 1995. 
B) The company was founded as,and still is,a "virtual" retailer with no inventory. 
C) The company is now a world-class leader in warehouse automation and management. 
D) The company uses both United Parcel Service and the U.S.Postal Service as shippers. 
E) Amazon obtains its competitive advantage through inventory management.

Question 5

Clement Bait and Tackle has been buying a chemical water conditioner for its bait (to help keep its baitfish alive)in an optimal fashion using EOQ analysis.The supplier has now offered Clement a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly.Current data for the problem are: D = 720 units per year;S = $6.00,I = 20% per year;P = $25.
(a)What is the EOQ at the current behavior?
(b)What is the annual total cost,including product cost,of continuing their current behavior?
(c)What are the annual total costs,if they accept either of the proposed discounts?
(d)At the cheapest of the total costs,are carrying costs equal to ordering costs? Explain.

Accepted Answer

(a)Q* = @#IMG-DLM& = 41.57 or 42 units at a time.

Question 6

Service level is the complement of the probability of a stockout.

Accepted Answer

A) True 
 B)False

Question 7

Average daily demand for a product is normally distributed with a mean of 20 units and a standard deviation of 3 units.Lead time is fixed at 25 days.What reorder point provides for a service level of 95 percent?

Accepted Answer

ROP = DL + Z × σd ×

Question 8

What is the primary purpose of the basic economic order quantity model shown below? Q* =

Accepted Answer

A) to calculate the reorder point,so that replenishments take place at the proper time 
B) to minimize the sum of carrying cost and holding cost 
C) to maximize the customer service level 
D) to minimize the sum of setup cost and holding cost 
E) to calculate the optimum safety stock 
A) to calculate the reorder point,so that replenishments take place at the proper time 
B) to minimize the sum of carrying cost and holding cost 
C) to maximize the customer service level 
D) to minimize the sum of setup cost and holding cost 
E) to calculate the optimum safety stock

Question 9

A toy manufacturer makes its own wind-up motors,which are then put into its toys.While the toy manufacturing process is continuous,the motors are intermittent flow.Data on the manufacture of the motors appears below.
Annual demand (D)= 50,000 units Daily subassembly production rate = 1,000
Setup cost (S)= $85 per batch Daily subassembly usage rate = 200
Carrying cost = $.20 per unit per year
(a)To minimize cost,how large should each batch of subassemblies be?
(b)Approximately how many days are required to produce a batch?
(c)How long is a complete cycle?
(d)What is the average inventory for this problem?
(e)What is the total annual inventory cost (holding plus setup)of the optimal behavior in this problem?

Accepted Answer

(a)Q*p = @#IMG-DLM& = 7288.7 or 7289 units.
(b)It

Question 10

A(n)________ system triggers inventory ordering on a uniform time frequency.

Accepted Answer

The answer of A(n)________ system triggers inventory ordering on a...

Question 11

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 12

The demand for automobiles would be considered as independent demand.

Accepted Answer

A) True 
 B)False

Question 13

How sensitive is the EOQ to variations in demand or costs?

Accepted Answer

The EOQ is relatively insensitive to sma

Question 14

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days.Demand during this period averages 100 units per day.What would be an appropriate re-order point?

Accepted Answer

Re-order point = dem

Question 15

Cycle counting is an inventory control technique exclusively used for cyclical items.

Accepted Answer

A) True 
 B)False

Question 16

Daily demand for a product is normally distributed with a mean of 200 units and a standard deviation of 20 units.The firm currently uses a reorder point system,with a lead time of 4 days.
a.What safety stock provides a 50% service level?
b.What safety stock provides a 90% service level?
c.What safety stock provides a 99% service level?

Accepted Answer

Standard deviation during lead

Question 17

Which of the following should be higher in P systems than Q systems?

Accepted Answer

A) lead time 
B) demand 
C) order size 
D) order spacing 
E) safety stock 
A) lead time 
B) demand 
C) order size 
D) order spacing 
E) safety stock

Question 18

Which of the following statements about ABC analysis is FALSE?

Accepted Answer

A) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. 
B) In ABC analysis,"A" items should have tighter physical inventory control than "B" or "C" items have. 
C) In ABC analysis,forecasting methods for "C" items may be less sophisticated than for "A" items. 
D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. 
E) Criteria other than annual dollar volume,such as high holding cost or delivery problems,can determine item classification in ABC analysis. 
A) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. 
B) In ABC analysis,"A" items should have tighter physical inventory control than "B" or "C" items have. 
C) In ABC analysis,forecasting methods for "C" items may be less sophisticated than for "A" items. 
D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. 
E) Criteria other than annual dollar volume,such as high holding cost or delivery problems,can determine item classification in ABC analysis.

Question 19

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

Accepted Answer

A) True 
 B)False

Question 20

If setup costs are reduced by substantial reductions in setup time,the production order quantity is also reduced.

Accepted Answer

A) True 
 B)False

Exam 12: Managing Inventory

In the simple EOQ model,if the carrying cost were to double,the EOQ would also double.

What is cycle counting?

In the basic EOQ model,if the cost of placing an order doubles,and all other values remain constant,the EOQ will:

Which of the following statements regarding Amazon.com is FALSE?

Service level is the complement of the probability of a stockout.

Average daily demand for a product is normally distributed with a mean of 20 units and a standard deviation of 3 units.Lead time is fixed at 25 days.What reorder point provides for a service level of 95 percent?

What is the primary purpose of the basic economic order quantity model shown below? Q* =

A(n)________ system triggers inventory ordering on a uniform time frequency.

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?

The demand for automobiles would be considered as independent demand.

How sensitive is the EOQ to variations in demand or costs?

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days.Demand during this period averages 100 units per day.What would be an appropriate re-order point?

Cycle counting is an inventory control technique exclusively used for cyclical items.

Which of the following should be higher in P systems than Q systems?

Which of the following statements about ABC analysis is FALSE?

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

If setup costs are reduced by substantial reductions in setup time,the production order quantity is also reduced.

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