Deck 8: Quantity and Inventory

Question 1

On an annual requirement of 100 items spread evenly throughout the year,a purchaser has an opportunity of buying all 100 units at a price of $100 each,or buying 10 units at a time at a price of $130.If the inventory carrying cost is 20 percent per year and assuming no ordering costs:

A)buying 100 at a time will save the company $2,130 per year.
B)buying 100 at a time will save the company $2,260 per year.
C)buying 100 at a time will save the company $3,000 per year.
D)buying 10 at a time will save the company $1,000 per year.
E)buying 10 at a time will save the company $870 per year.

Answer 1

A

Question 2

If there were 400 requests for a particular item in a year and 372 were immediately satisfied,the service level would be 7 percent.

Answer 2

False

Question 3

Strategies for managing "A" items in ABC analysis are:

A)minimizing inventories.
B)using procurement cards.
C)review inventory levels frequently.
D)minimizing inventories and review inventory levels frequently.
E)using procurement cards and review inventory levels frequently.

Answer 3

D

Question 4

Closed-loop MRP:

A)is a system which closes the loop between the supplier and the purchaser.
B)provides a feedback loop between capacity and the master production schedule.
C)requires a feedback loop between purchasing and accounting.
D)requires a check between the master production schedule and inventory.
E)allows a unit manager to sequence jobs done in that department.

Question 5

The three main inputs of a material requirements planning (MRP)system are:

A)required human resources,machine resources,and available resources.
B)required manufacturing resources,human resources,and master production schedule.
C)inventory records,annual sales forecast,and a master production schedule.
D)Pareto analysis results,inventory records,and a master production schedule.
E)bill of material,a master production schedule,and the inventory record.

Question 6

Strategies for managing "C" items in ABC analysis are:

A)review inventory levels frequently.
B)carrying inventories.
C)concentrating requirements with one or a few suppliers.
D)review inventory levels frequently and carrying inventories.
E)carrying inventories and concentrating requirements with one or a few suppliers.

Question 7

When the carrying cost of inventory is expressed as a percentage:

A)the lower it is,the lower the economic order quantity.
B)it is usually the same as the borrowing cost of the organization.
C)it is multiplied by the unit variable manufacturing cost to calculate the per unit carrying cost.
D)it is multiplied by the total unit cost,including allocated fixed costs,to calculate the per unit carrying cost.
E)it is multiplied by the labor and material cost to calculate the per unit carrying cost.

Question 8

Which statement is most accurate when deciding how much and when to buy?

A)Balance price,volume,carrying cost,and the cost of stock-outs.
B)Use the forecast future demand,lead times,and prices to determine optimal order volume.
C)Determine the price premium to attain the desired order quantity.
D)Managers seldom make purchase decisions until they are absolutely sure of the volume required.
E)The costs of placing orders and holding inventory are so low they do not significantly affect the decision of how much to buy.

Question 9

For the supply function,time-based strategies that impact competitive advantage relate to cycle time reductions,and greater coordination of materials and information flows.

Question 10

Cycle inventories are used to:

A)avoid an anticipated change in supply,demand,or price.
B)protect against disruptions due to unplanned events.
C)reduce the number of setups.
D)accommodate different rates or patterns of demand.
E)avoid an anticipated change in supply,demand,or price,and protect against disruptions due to unplanned events.

Question 11

A company manufactures 1,200 cylinders per day,each requiring a pressure gauge.The purchase price of the pressure gauge is $3.20.The company controller estimated annual holding costs at 25 percent per year,while the cost of placing an order was estimated at $55.00.Assuming that the plant operates 45 weeks per year,the EOQ for the pressure gauge is:

A)3,000 units
B)2,929 units.
C)2,872 units.
D)2,725 units.
E)1,200 units.

Question 12

Stock-out costs may be higher in a buyer's market compared to a seller's market.

Question 13

Independent demand items are:

A)derived demand.
B)determined directly by customer orders.
C)determined by the production schedule.
D)derived demand and determined directly by customer orders.
E)derived demand and determined by the production schedule.

Question 14

Decoupling inventories are used to:

A)avoid an anticipated change in supply,demand,or price.
B)protect against disruptions due to unplanned events.
C)reduce the number of setups.
D)accommodate different rates or patterns of demand.
E)avoid an anticipated change in supply,demand,or price,and to reduce the number of setups.

Question 15

Demand for buttons and zippers at a sportswear manufacturer is an example of:

A)buffer demand.
B)anticipated demand.
C)derived demand.
D)independent demand.
E)scheduled demand.

Question 16

When a commercial janitorial service company predicts demand for its services using commercial building permits issued,office leasing and vacancy rates,this is an example of:

A)a repetitive pattern modeling tool.
B)a time series forecasting technique.
C)a deterministic model.
D)a causal model.
E)a qualitative forecasting technique.

Question 17

Anticipation inventories are carried:

A)to stock the distribution pipelines.
B)to cover a well-defined future need.
C)to permit activities on either side of a major process.
D)to protect against machine breakdown.
E)to protect against uncertainties in supply and demand.

Question 18

Ordering raw material from a supplier in full truck loads only is an example of decoupling inventory.

Question 19

Managing the consumption of services organization-wide:

A)is easy because organization-wide services spend data is readily accessible.
B)is of little concern because annual spend for services is declining in most organizations.
C)is easy because forecasting aggregate demand for services is typically more reliable than forecasting demand for goods.
D)is easy because supply management has historically had responsibility for managing services spend.
E)is difficult because multiple contracts may exist at varying prices and terms with the same suppliers.

Question 20

JIT requires frequent deliveries of relatively small quantities in compliance with quality standards.

Question 21

Inventories can be classified by form and function.

Question 22

The "bullwhip effect" is a term that refers to the buildup of inventory in a supply chain resulting from fluctuations in demand.

Question 23

Holding extra inventory to protect against a supply disruption from a supplier strike is an example of buffer inventory.

Question 24

Supply chain inventory management involves establishing operational design of the physical flow of goods and services,and managing information flows.

Question 25

In fixed-period inventory models,a fixed economic order quantity is ordered when the reorder point is reached.

Question 26

Any cost associated with having,as opposed to not having,inventory is included in inventory carrying costs,including (1)capital costs, (2)inventory service costs, (3)storage space costs,and (4)inventory risk costs.

Question 27

Usage of independent demand items is determined by the production schedule.

Question 28

MRP II is a business practice in which multiple trading partners agree to exchange knowledge and share risks to generate the most accurate forecast possible,and develop effective replenishment plans.

Question 29

The Delphi technique is a method of quantitative forecasting.

Question 30

Kanban systems are most useful for low-volume parts used on an infrequent basis.