Deck 12: Managing Inventories in Supply Chains

Question 1

In the context of ABC inventory analysis,which of the following statements is true of class A items?

A) They require close control by operations managers.
B) They comprise less than 30 percent of the total dollar usage.
C) They can be managed using automated computer systems.
D) They account for more than 50 percent of inventory items.

Answer 1

They require close control by operations managers.

Question 2

Single-period inventory models are used in situations involving items that can be carried in inventory and sold in future periods.

Answer 2

False

Question 3

In a fixed-order-quantity system,when demand is uncertain,using economic order quantity (EOQ)based only on the average demand will result in a low probability of a stockout.

Answer 3

False

Question 4

In the Pareto Principle,a vital few control a high percentage of the wealth.

Question 5

CraftWare Inc.,a furniture manufacturer,uses ABC analysis to define its inventory value.The inventory contains wood,cast iron,adhesive,and carbon fiber.If wood accounts for 50 percent of the items and 5 percent of the total dollar value; carbon fiber accounts for 10 percent of the items and 60 percent of the total dollar value; cast iron accounts for 25 percent of the items and 18 percent of the total dollar value; and adhesive accounts for 15 percent of the items and 17 percent of the total dollar value,_____ can be classified as a class C item.

A) wood
B) carbon fiber
C) cast iron
D) adhesive

Question 6

In the context of fixed-quantity systems,_____ is defined as the on-hand quantity (OH)plus any orders placed but which have not arrived minus any backorders (BO).

A) inventory position
B) the reorder point
C) a stock-keeping unit
D) work-in-process inventory

Question 7

In the context of ABC inventory analysis,which of the following statements is true of class C items?

A) They require close control by operations managers.
B) They comprise more than 80 percent of the total dollar usage.
C) They can be managed using automated computer systems.
D) They make up less than 10 percent of inventory items.

Question 8

_____ inventory consists of partially completed products in various stages of completion that are awaiting further processing.

A) Raw materials
B) Work-in-process
C) Finished-goods
D) Safety stock

Question 9

Vision Toys uses a fixed-quantity system to manage its inventories.The inventory includes plastic and LED bulbs.It was observed that the company often faces stockout of plastic.The average weekly demand for plastic is 100 pounds,and historical data show that the standard deviation of weekly demand is about 7.The lead time from the plastic supplier is 2 weeks.If the company's acceptable service level is 95 percent and the number of standard deviations necessary to achieve the acceptable service level is 1.645,the reorder point for plastic with safety stock is:

A) less than or equal to 125 pounds.
B) more than 125 pounds but less than or equal to 175 pounds.
C) more than 175 pounds but less than or equal to 225 pounds.
D) more than 225 pounds.

Question 10

In the context of inventory costs,_____ costs are incurred as a result of the work involved in configuring tools,equipment,and machines within a factory to produce an item.

A) setup
B) holding
C) stockout
D) unit

Question 11

_____ applies to inventory situations in which one order is placed for a good in anticipation of a future selling season where demand is uncertain.

A) A fixed-period inventory system
B) A fixed-quantity inventory system
C) The deliver-lag inventory model
D) The single-period inventory model

Question 12

Stable demand is usually called _____ demand.

A) static
B) overfull
C) unwholesome
D) dynamic

Question 13

The demand for trains between Marshdell and Deepbarrow varies throughout the year.The demand reaches its peak in summer and drops during winter.This demand for trains can be categorized as _____ demand.

A) static
B) overfull
C) unwholesome
D) dynamic

Question 14

Radio-frequency identification (RFID)chips allow firms to track individual containers.

Question 15

The demand for bread in Ahoma City ranges from 100 to 120 tons per day,every day of the year.The demand is easily satisfied on a daily basis.This demand for bread can be categorized as _____ demand.

A) static
B) overfull
C) unwholesome
D) dynamic

Question 16

Marketing and operations prefer high inventory levels,whereas finance would prefer small inventories.

Question 17

The single-period inventory model applies to inventory situations where demand is uncertain.

Question 18

In the context of using technology to manage inventories,radio-frequency identification (RFID)chips offer an accuracy of less than 70 percent.

Question 19

A single-period inventory problem can be solved using a technique called _____ analysis.

A) marginal economic
B) total cost
C) critical value
D) reorder point

Question 20

Setup costs include costs associated with maintaining storage facilities,such as gas and electricity,taxes,and insurance.

Question 21

Which of the following statements is true of a fixed-period system (FPS)?

A) It orders a fixed quantity of items when the inventory position reaches or drops below the reorder point (r).
B) It orders sufficient stock at the time of review to bring the inventory position up to the replenishment level (M).
C) It maintains a constant order quantity every review period.
D) It checks the inventory position on a continuous basis.

Question 22

Jae's Shoes is considering a change of their current inventory control system for sneakers.The information regarding the neckties is: Demand = 1000 pairs/week; Lead time = 3 weeks; Order cost = $20/order; Holding cost = $10.00/pair/yr; Cycle service level = 95%; Standard deviation of weekly demand = 48; and Number of weeks per year = 52.To calculate the relative frequency use the following values: _____.

A) Number of Days and Standard Deviation of Weekly Demand
B) Units Sold and Demand
C) Units Sold and Number of Days
D) Lead Time and Holding Cost

Question 23

In the context of inventory costs,_____ costs can reflect lost sales for external customers or costs associated with interruptions to assembly lines for internal customers.

A) holding
B) stockout
C) ordering
D) setup

Question 24

Jae's Shoes is considering a change of their current inventory control system for sneakers.The information regarding the neckties is: Demand = 1000 pairs/week; Lead time = 3 weeks; Order cost = $20/order; Holding cost = $10.00/pair/yr; Cycle service level = 95%; Standard deviation of weekly demand = 48; and Number of weeks per year = 52.To calculate the relative frequency use the following values: _____.

A) Number of Days and Standard Deviation of Weekly Demand
B) Units Sold and Demand
C) Units Sold and Number of Days
D) Lead Time and Holding Cost

Question 25

In the context of a fixed-order-quantity system,stockouts occur whenever the lead-time demand _____.

A) exceeds the reorder point
B) exceeds the work-in-process inventory
C) becomes equal to the finished-goods inventory
D) becomes equal to the break-even point

Question 26

In the context of managing inventories in supply chains,_____ is the time between placement of an order and its receipt.

A) the lead time
B) a time series
C) the changeover time
D) a time horizon

Question 27

In the context of inventory costs,_____ costs can reflect backorders or service interruptions for external customers.

A) holding
B) stockout
C) ordering
D) setup

Question 28

Which of the following statements is true of backorders?

A) They occur as a result of excessive stock.
B) They occur when a customer is unwilling to wait for an ordered item.
C) They result in additional costs.
D) They force a customer to purchase elsewhere.

Question 29

Based on the constant demand assumption in the economic order quantity (EOQ)model,the average cycle inventory is:

A) the order quantity divided by the number of inventory cycles per year.
B) the annual demand divided by the number of inventory cycles per year.
C) half of the order quantity.
D) half of the annual usage.

Question 30

In the context of inventory management,a(n)_____ is a single item or asset stored at a particular location.

A) stock-keeping unit
B) make-to-stock product
C) average lead stock
D) buffer stock

Question 31

_____ inventory is an additional amount of inventory that is kept over and above the average amount required to meet demand.

A) Seasonal
B) Work-in-process
C) Finished-goods
D) Safety stock

Question 32

_____ inventory is inventory that results from purchasing or producing in larger lots than are needed for immediate consumption or sale.

A) Finished-goods
B) Stockout
C) Cycle
D) Work-in-process

Question 33

A buyer for a department store orders sweaters about 6 months before the winter season.The store plans to hold a March clearance sale to sell any surplus goods by February 29.Each piece costs $100 per pair and sells for $120 per pair.At the sale price of $60 per pair,it is expected that any remaining stock can be sold during the March sale.Assume that a uniform probability distribution ranging from 250 to 450 items describes the demand.The expected demand is 300.In the context of the single period inventory system,the optimal order size Q must satisfy the condition _____.

A) P(demand ≤ Q*)= 1/2
B) P(demand ≤ Q*)= 1/3
C) P(demand ≤ Q*)= 1/4
D) P(demand ≤ Q*)= 1/5

Question 34

Which of the following statements is true of the independent demand for a stock-keeping unit (SKU)?

A) It needs to be calculated using the forecast of dependent demand.
B) It is affected by the demand of other SKUs.
C) It is directly related to the demand of raw materials.
D) It needs to be forecasted.