Question 1

In the quantity discount model,it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

Accepted Answer

A) True 
 B)False

Question 2

ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

Accepted Answer

A) True 
 B)False

Question 3

Joe's Camera shop has a favorite model that has annual sales of 145.The cost to place an order to replenish inventory is $25 per order,and annual inventory holding cost per unit is $20.Assume the store is open 350 days per year.
a.What is the optimal order size?
b.What is the optimal number of orders per year?
c.What is the optimal number of days between orders?
d.What is the annual holding and setup cost?

Accepted Answer

a.The optimal order size is Q* = @#IMG-DLM& = 19.0

Question 4

A printing company estimates that it will require 1,000 reams of a certain type of paper in a given period.The cost of carrying one unit in inventory for that period is 50 cents.The company buys the paper from a wholesaler in the same town,sending its own truck to pick up the orders at a fixed cost of $20.00 per trip.Treating this cost as the order cost, (a)what is the optimum number of reams to buy at one time? (b)How many times should lots of this size be bought during this period? (c)What is the minimum cost (holding and setup)of maintaining inventory on this item for the period? (d)Of this total cost,how much is carrying cost and how much is ordering cost?

Accepted Answer

This is an EOQ problem,even though the t

Question 5

Perform an ABC analysis on the following set of products.

Accepted Answer

The table below details the contribution

Question 6

Which of the following items is mostly likely managed using a single-period order model?

Accepted Answer

A) Christmas trees 
B) canned food at the grocery store 
C) automobiles at a dealership 
D) metal for a manufacturing process 
E) gas sold to a gas station 
A) Christmas trees 
B) canned food at the grocery store 
C) automobiles at a dealership 
D) metal for a manufacturing process 
E) gas sold to a gas station

Question 7

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car.Daily paper sales are normally distributed,with a mean of 100 and standard deviation of 10.He sells papers for $0.50 and pays $0.30 for them.Unsold papers are trashed with no salvage value.How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?

Accepted Answer

Service level = Cs/(Cs + Co)= .2/(.2+.3)

Question 8

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 9

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 10

In the EOQ model,for a given level of demand,annual holding cost is larger as the order quantity is ________.

Accepted Answer

The answer of In the EOQ model,for a given level...

Question 11

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones?

Accepted Answer

A) housing costs 
B) material handling costs 
C) labor cost 
D) investment costs 
E) pilferage,scrap,and obsolescence 
A) housing costs 
B) material handling costs 
C) labor cost 
D) investment costs 
E) pilferage,scrap,and obsolescence

Question 12

Demand for ice cream at the Ouachita Dairy can be approximated by a normal distribution with a mean of 47 gallons per day and a standard deviation of 8 gallons per day.The new management desires a service level of 95%.Lead time is four days;the dairy is open seven days a week.What reorder point would be consistent with the desired service level?

Accepted Answer

SS = 1.65 × 8 × @#IMG-DLM& = 2

Question 13

If a safety stock problem includes parameters for average daily demand,standard deviation of demand,and lead time,then ________ is variable and ________ is constant.

Accepted Answer

The answer of If a safety stock problem includes parameters...

Question 14

Cycle counting:

Accepted Answer

A) is a process by which inventory records are verified once a year. 
B) eliminates annual inventory adjustments. 
C) provides a measure of inventory turnover. 
D) assumes that all inventory records must be verified with the same frequency. 
E) assumes that the most frequently used items must be counted more frequently. 
A) is a process by which inventory records are verified once a year. 
B) eliminates annual inventory adjustments. 
C) provides a measure of inventory turnover. 
D) assumes that all inventory records must be verified with the same frequency. 
E) assumes that the most frequently used items must be counted more frequently.

Question 15

A product has a reorder point of 110 units,and is ordered four times a year on average.The following table shows the historical distribution of demand values observed during lead time.
   Managers have noted that stockouts occur 30 percent of the time with this policy,and they question whether a change in inventory policy,to include some safety stock,might be an improvement.The managers realize that any safety stock would increase the service level,but they are worried about the increased costs of carrying the safety stock.Currently,stockouts are valued at $20 per unit per occurrence,while inventory carrying costs are $10 per unit per year.What is your advice? Do higher levels of safety stock add to total costs,or not? What level of safety stock is best?

Accepted Answer

@#IMG-DLM& The cheapest inventory policy

Question 16

Demand for a product is approximately normal,averaging 5 units per day with a standard deviation of 1 unit per day.Lead time for this product is approximately normal,averaging 10 days with a standard deviation of 3 days.What reorder point provides a service level of 90 percent?

Accepted Answer

This problem requires formula (12-17),si

Question 17

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.

Question 18

Identify the four types of inventory.

Accepted Answer

(1)raw material inventory; (2)

Question 19

The fixed-period inventory model can have a stockout during the review period as well as during the lead time,which is why fixed-period systems require more safety stock than fixed-quantity systems.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 12: Managing Inventory

In the quantity discount model,it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

Perform an ABC analysis on the following set of products.

Which of the following items is mostly likely managed using a single-period order model?

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?

In the EOQ model,for a given level of demand,annual holding cost is larger as the order quantity is ________.

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones?

If a safety stock problem includes parameters for average daily demand,standard deviation of demand,and lead time,then ________ is variable and ________ is constant.

Cycle counting:

Demand for a product is approximately normal,averaging 5 units per day with a standard deviation of 1 unit per day.Lead time for this product is approximately normal,averaging 10 days with a standard deviation of 3 days.What reorder point provides a service level of 90 percent?

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?

Identify the four types of inventory.

The fixed-period inventory model can have a stockout during the review period as well as during the lead time,which is why fixed-period systems require more safety stock than fixed-quantity systems.

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

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If a safety stock problem includes parameters for average daily demand,standard deviation of demand,and lead time,then is variable and is constant.