Question 1

Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management.

Accepted Answer

A) True 
 B)False  False

Question 2

Describe the costs associated with ordering and maintaining inventory.

Accepted Answer

Costs that are associated with ordering and maintaining inventory include initial purchase cost of the item,holding cost (insurance,space,heat,light,security,warehouse personnel,etc. ),obsolescence or deterioration cost (particularly important in perishable goods or in a product that is undergoing rapid technological evolution),and ordering or setup cost (cost of forms,clerical processing,etc. ,or cost of machine setup).

Question 3

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 management and automation. 
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 management and automation. 
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. B

Question 4

One advantage of cycle counting is that it maintains accurate inventory records.

Accepted Answer

A) True 
 B)False

Question 5

Work-in-process inventory is devoted to maintenance,repair,and operations.

Accepted Answer

A) True 
 B)False

Question 6

Demand for gallons of milk is normal with a weekly mean of 50 and standard deviation of 15.How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?

Accepted Answer

Z for 50% is 0,Z for 80% is .8

Question 7

In the quantity discount model,the cost of acquiring goods (product cost)is not a factor in determining lot size.

Accepted Answer

A) True 
 B)False

Question 8

According to the global company profile,Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.

Accepted Answer

A) True 
 B)False

Question 9

Service level is

Accepted Answer

A) the chance of stocking out. 
B) the chance of stockpiling. 
C) something that should be minimized in retail. 
D) calculated as the cost of a shortage divided by (the cost of overage + the cost of shortage)for single- period models. 
E) not related to the concept of stocking out. 
A) the chance of stocking out. 
B) the chance of stockpiling. 
C) something that should be minimized in retail. 
D) calculated as the cost of a shortage divided by (the cost of overage + the cost of shortage)for single- period models. 
E) not related to the concept of stocking out.

Question 10

Inventory that separates various parts of the production process performs a ________ function.

Accepted Answer

The answer of Inventory that separates various parts of the...

Question 11

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

Accepted Answer

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

Question 12

In cycle counting,the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is not a function of inventory?

Accepted Answer

A) to decouple or separate parts of the production process 
B) to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers 
C) to take advantage of quantity discounts 
D) to hedge against inflation 
E) to double the amount of safety stock 
A) to decouple or separate parts of the production process 
B) to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers 
C) to take advantage of quantity discounts 
D) to hedge against inflation 
E) to double the amount of safety stock

Question 14

If demand is not uniform and constant,then stockout risks can be controlled by all of the following except

Accepted Answer

A) increasing the EOQ. 
B) placing an extra order. 
C) raising the selling price to reduce demand. 
D) adding safety stock. 
E) reducing the reorder point. 
A) increasing the EOQ. 
B) placing an extra order. 
C) raising the selling price to reduce demand. 
D) adding safety stock. 
E) reducing the reorder point.

Question 15

The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers.Mean demand during the reorder period is 170 trimmers,and the standard deviation is 60 trimmers.The annual cost of carrying one trimmer in inventory is $6.The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer)if the service level were increased to 99%.Is it worthwhile for Winfield to make this change?

Accepted Answer

This is solved with a cost comparison: t

Question 16

The demand for automobiles would be considered an independent demand.

Accepted Answer

A) True 
 B)False

Question 17

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

Accepted Answer

A) True 
 B)False

Question 18

What is MRO an acronym for? What is the function of MRO inventories?

Accepted Answer

MRO inventories are devoted to

Question 19

A bakery wants to determine how many trays of doughnuts it should prepare each day.Demand is normal with a mean of 5 trays and standard deviation of 1 tray.If the owner wants a service level of at least 95% how many trays should he prepare (round to the nearest whole tray)? Assume doughnuts have no salvage value after the day is complete.

Accepted Answer

A) 5 
B) 4 
C) 6 
D) 7 
E) unable to determine with the above information 
A) 5 
B) 4 
C) 6 
D) 7 
E) unable to determine with the above information

Question 20

Central University uses $123,000 of a particular toner cartridge for laser printers in the student computer labs each year.The purchasing director of the university estimates the ordering cost at $45 and thinks that the university can hold this type of inventory at an annual storage cost of 22% of the purchase price of $1 each.How many months' supply should the purchasing director order at one time to minimize the total annual cost of purchasing and carrying?

Accepted Answer

First,calculate the EOQ from the data pr

Exam 12: Inventory Management

Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management.

Describe the costs associated with ordering and maintaining inventory.

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

One advantage of cycle counting is that it maintains accurate inventory records.

Work-in-process inventory is devoted to maintenance,repair,and operations.

Demand for gallons of milk is normal with a weekly mean of 50 and standard deviation of 15.How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?

In the quantity discount model,the cost of acquiring goods (product cost)is not a factor in determining lot size.

According to the global company profile,Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.

Service level is

Inventory that separates various parts of the production process performs a ________ function.

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

In cycle counting,the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

Which of the following is not a function of inventory?

If demand is not uniform and constant,then stockout risks can be controlled by all of the following except

The demand for automobiles would be considered an independent demand.

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

What is MRO an acronym for? What is the function of MRO inventories?

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