Deck 7: Inventory

Question 1

When calculating a Reorder Point (ROP),which of the following factors WOULD NOT affect the calculation?

A)Item's EOQ
B)Delivery lead time.
C)Demand during the delivery lead time.
D)Standard deviation of demand during delivery lead time.

Answer 1

A

Question 2

How many units should RFC order each time?

A)2000
B)200
C)100
D)400

Answer 2

A

Question 3

Suppose demand is 25 units a month and average inventory is 30 units and unit cost is $10.What is the annual inventory turnover?

A)100
B)10
C).83333
D)83.333

Answer 3

B

Question 4

What is the average inventory? (Round up to the nearest whole number. )

A)1200 units
B)283 units
C)250 units
D)275 units

Question 5

Alpha Company places 10 orders per year with its supplier.Each order is for an amount exactly equal to the EOQ.Alpha's order cost has been determined to be $50 per order.Alpha carries no safety stock at all.What is Alpha's annual inventory carrying cost?

A)cannot be determined without further information
B)$50
C)$250
D)$500

Question 6

Which of the following is true?

A)RAJs EOQ is higher than Lee's EOQ
B)LEE's EOQ is higher than RAJ's EOQ
C)both have the same EOQ

Question 7

A company recently lowered its service performance from 99% product availability to 97% product availability.The change saved the company exactly $1 million per year in inventory carrying cost.Senior management now wants to lower the service level to 95% from 97%.Such a further change is likely to save:

A)less than $1 million
B)about another $1 million
C)more than $1 million

Question 8

Safety stock exists for which of the following reasons?

A)To allow less expensive purchases by buying more
B)To allow for transportation time
C)To provide protection against the uncertainties of supply and demand
D)None of the above

Question 9

The EOQ is? (Round up to the nearest whole number. )

A)566 pounds
B)164 pounds
C)163 pounds
D)26667 pounds

Question 10

What is the inventory turnover?

A)8.48 times
B)0.7 times
C)10.49 times
D)10.5 times

Question 11

Which of the following IS NOT an example of CC?

A)Cost of obsolescence and loss
B)Taxes
C)Insurance
D)All of the above

Question 12

What happens to the EOQ when the unit cost increases (assuming all other variables remain the same)?

A)EOQ increases
B)EOQ decreases
C)EOQ remains the same
D)None of the above (need more information)

Question 13

Given the information above about RAJ and LEE,which of the following is true?

A)both will have the same annual ordering cost
B)both will have the same reorder point
C)both will have the same inventory turnover
D)all of the above are true

Question 14

Suppose you tell management at Cooper Company (in the above two questions)it should raise safety stock to the six sigma level.If Cooper decides to do this,it will incur an additional inventory carrying cost of approximately how much?

A)$2,160
B)$234
C)cannot be determined
D)$1,566

Question 15

A batch of Raisin Bran that has been made at Kellogg's,but not yet packaged in its final cereal box would be an example of ________ inventory.

A)Raw Material
B)Work-in-process
C)Finished Goods
D)Maintenance,repair and operating supplies (MRO)

Question 16

How many orders will RIM place in a year? (Round up to the nearest whole number. )

A)2 orders
B)3 orders
C)4 orders
D)5 orders

Question 17

What is the annual ordering cost (based on the rounded up number of orders)?

A)$150
B)$175
C)$200
D)$250

Question 18

How much is the annual inventory carrying cost of the safety stock because of this decision?

A)$755
B)$610
C)$594
D)$351

Question 19

Suppose management decides it wants to offer a 95% service level.That is,Cooper Company is willing to experience a stock-out probability of 5% during the order cycle.How much safety stock should be carried?

A)33 units
B)35 units
C)46 units
D)25 units

Question 20

Jones Company has calculated that the EOQ for a particular item is 1,000 units.However,Jones does not have enough capital to order that many units each time,so it only orders 250 units at a time.This will result in:

A)Higher annual inventory carrying cost than ordering the EOQ quantity
B)Lower annual inventory carrying cost than ordering the EOQ quantity
C)Lower annual ordering cost than ordering the EOQ quantity
D)Cannot be determined

Question 21

If average lead time went up from 10 to 15 days,what will happen to EOQ?

A)Increase of 200 units
B)Decrease of 200 units.
C)No change in EOQ
D)Increase of 100 units

Question 22

What would average inventory be if RFC orders this quantity every time?

A)100
B)200
C)1000
D)50

Question 23

Which of the following is included in the cost of carrying inventory?

A)Heating and lighting a warehouse
B)inventory obsolescence
C)material handling
D)all of the above