Deck 7: Independent Demand Inventory Management

Question 1

Cleaning supplies are an example of what type of inventory?

A) Raw material
B) Work-in-production
C) MRO
D) Finished goods

Answer 1

C

Question 2

An airline stocking up on fuel when prices are low in anticipation of rising prices is building up?

A) Cycle inventory
B) Hedge inventory
C) Safety stocks
D) Transportation inventory

Answer 2

B

Question 3

Oil that is on an oil tanker that is in transit to a customer would be viewed as what type of inventory function?

A) Cycle
B) Hedge
C) Safety stocks
D) Transportation

Answer 3

D

Question 4

It is typical for inventory to represent a significant investment in?

A) Time
B) Money
C) Both time and money
D) Neither time nor money

Question 5

Purchased items that are consumed in-house would be classified as?

A) Raw materials
B) MRO supplies
C) Work-in-process
D) Finished goods

Question 6

What type of inventory function allows demand to be met during periods of expected high demand?

A) Anticipation
B) Cycle
C) Hedge
D) Transportation

Question 7

Bread that is baked, packaged, and ready for customers to purchase would be considered to be what type of inventory?

A) Raw material
B) Work-in-process
C) MRO
D) Finished goods

Question 8

Completed products ready for delivery to customers are?

A) Raw materials
B) MRO supplies
C) Work-in-process
D) Finished goods

Question 9

Inventory that is to be used to cover demand over the period between purchases or production runs is referred to as?

A) Cycle
B) Hedge
C) Safety stocks
D) Transportation

Question 10

Items that are in an intermediate stage of processing are?

A) Raw materials
B) MRO supplies
C) Work-in-process
D) Finished goods

Question 11

Carrying too little inventory can lead to all of the following except?

A) Stockouts
B) Plant shutdowns
C) Excess inventory carrying costs
D) Dissatisfied customers

Question 12

Successfully managing inventories can positively impact all of the following except?

A) Customer service
B) Product design
C) Competitiveness
D) Cost

Question 13

What type of inventory function is used to satisfy unforeseen demand?

A) Anticipation
B) Safety stocks
C) Hedge
D) Transportation

Question 14

When WIP inventories are completed they then become?

A) Raw material
B) Work-in-production
C) MRO
D) Finished goods

Question 15

Types of inventories include all of the following except?

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

Question 16

As bread is being baked at a bakery, it would be considered as what type of inventory?

A) Raw material
B) Work-in-process
C) MRO
D) Finished goods

Question 17

A firm releases a new product that is unexpectedly very popular. It is likely that the firm will have to rely on which type of inventory function?

A) Cycle
B) Hedge
C) Safety stocks
D) Transportation

Question 18

Carrying too much inventory can lead to all of the following except?

A) Plant shutdowns
B) Inventory write-downs
C) Excess inventory carrying costs
D) Storage problems

Question 19

Purchased items that are used in manufactured products or services are?

A) Raw materials
B) MRO supplies
C) Work-in-process
D) Finished goods

Question 20

Wheat and other ingredients used to make bread would be considered what type of inventory?

A) Raw material
B) Work-in-process
C) MRO
D) Finished goods

Question 21

When to place an order is driven by?

A) Order lead time
B) How many units are demanded during lead time
C) Both order lead time and how many units are demanded during lead time
D) Neither order lead time nor how many units are demanded during lead time

Question 22

The following are costs associated with the bullwhip effect except?

A) Idle capacity
B) Reduced supply chain costs
C) Excess inventory
D) Stockouts

Question 23

Holding too much inventory ____________ the risk of a stockout.

A) Increases
B) Decreases
C) Neither increases nor decreases
D) Impossible to tell the effect of too little inventory on risk of a stockout

Question 24

Labor and paperwork costs associated with placing an order are referred to as?

A) Order cost
B) Stockout cost
C) Inventory carrying cost
D) Purchase cost

Question 25

The following are costs that would contribute to inventory carrying cost except?

A) Warehouse rent
B) Lost goodwill
C) Shrinkage costs
D) Handling costs

Question 26

Average retail stockout rates are approximately?

A) 2%
B) 8%
C) 15%
D) 20%

Question 27

Inventory that is in-transit is?

A) Cycle inventory
B) Hedge inventory
C) Safety stocks
D) Transportation inventory

Question 28

Internal demand for a firm's finished products is?

A) Independent demand
B) Dependent demand
C) Both independent and dependent demand
D) Neither independent nor dependent demand

Question 29

The administrative costs associated with purchasing items is?

A) Order cost
B) Stockout cost
C) Inventory carrying cost
D) Purchase cost

Question 30

Holding too little inventory ____________ the risk of a stockout.

A) Increases
B) Decreases
C) Neither increases nor decreases
D) Impossible to tell the effect of too little inventory on risk of a stockout

Question 31

The cost associated with storing inventory is?

A) Order cost
B) Stockout cost
C) Inventory carrying cost
D) Purchase cost

Question 32

An example of a dependent demand item would be?

A) Bicycle seat
B) Bicycle
C) Both a bicycle seat and a bicycle
D) Neither a bicycle seat nor a bicycle

Question 33

Which effect can result from the use of forecasting and safety stock?

A) Longbow
B) Ricochet
C) Boomerang
D) Bullwhip

Question 34

The actual cost of items bought from a supplier is referred to as the?

A) Order cost
B) Stockout cost
C) Inventory carrying cost
D) Purchase cost

Question 35

All of the following are typical inventory costs except?

A) Order cost
B) Stockout cost
C) Inventory carrying cost
D) Selling cost

Question 36

External demand for a firm's finished products is?

A) Independent demand
B) Dependent demand
C) Both independent and dependent demand
D) Neither independent nor dependent demand

Question 37

An example of an independent demand item would be?

A) Bicycle seat
B) Bicycle
C) Both a bicycle seat and a bicycle
D) Neither a bicycle seat nor a bicycle

Question 38

Total annual inventory costs include all of the following except?

A) Carrying costs
B) Order costs
C) Marketing costs
D) Stockout costs

Question 39

A firm that is making purchase plans must decide?

A) When to order
B) How much to order
C) Both when to order and how much to order
D) Neither when to order nor how much to order

Question 40

Inventory cost reduction will result in?

A) Profit increase
B) Profit increase, but only if stockout costs are avoided
C) Profit decrease
D) Profit decrease, but only if stockout costs are avoided

Question 41

The EOQ model assumes that daily demand is?

A) Unknown
B) Increasing
C) Decreasing
D) Constant

Question 42

The EOQ model assumes that order costs are?

A) Unknown
B) Known, but variable
C) Known and constant
D) The EOQ model makes no particular assumptions about order costs

Question 43

In the EOQ model, the annual inventory carrying cost is?

A) Q/2
B) i*C
C) (Q/2)*i*C
D) (i*C)/2

Question 44

In the EOQ model, the order quantity Q arrives?

A) Every Q days
B) Every Q/d days
C) Every d/Q days
D) Every d days

Question 45

The EOQ model requires how much safety stock?

A) 0
B) Q/2
C) Q
D) 2Q

Question 46

The maximum inventory level experienced in the EOQ model is?

A) 0
B) Q/2
C) Q
D) 2Q

Question 47

The EOQ model is generally viewed as?

A) Unrealistic due to its assumptions
B) Simple to implement
C) Both unrealistic due to its assumptions and simple to implement
D) Neither unrealistic due to its assumptions nor simple to implement

Question 48

In the EOQ model, the annual order cost is given by?

A) (Q/D)*S
B) D/Q
C) (D/Q)*S
D) Q/D

Question 49

The average inventory level in the EOQ model is?

A) Q
B) Q/2
C) L
D) L/2

Question 50

In the EOQ model, the number of days between orders is given by?

A) Q/d
B) d/Q
C) D/Q
D) Q/D

Question 51

The EOQ model assumes that?

A) Purchase quantity discounts are available
B) Purchase quantity discounts are not available
C) Purchase quantity discounts are neither available nor unavailable
D) The EOQ model makes no particular assumptions about purchase quantity discounts

Question 52

The minimum inventory level experienced in the EOQ model is?

A) 0
B) Q/2
C) Q
D) 2Q

Question 53

The EOQ order quantity minimizes the sum of which two annual costs?

A) Holding cost and stockout cost
B) Order cost and stockout cost
C) Holding cost and purchase cost
D) Holding cost and order cost

Question 54

In the EOQ model, the annual number of orders is given by?

A) Q/2
B) D/Q
C) Q/D
D) 2Q

Question 55

The EOQ model assumes that inventory carrying costs per unit are?

A) Unknown
B) Known, but variable
C) Known and constant
D) The EOQ model makes no particular assumptions about inventory carrying costs per unit

Question 56

EOQ refers to?

A) Economic order quality
B) Economic order query
C) Economic order quotient
D) Economic order quantity

Question 57

The EOQ model assumes that each purchase order arrives?

A) In a single delivery
B) Spread across multiple deliveries
C) In a single delivery or spread across multiple deliveries
D) In each exactly two deliveries

Question 58

In the EOQ model, the order quantity is?

A) d/2
B) d
C) Q/2
D) Q

Question 59

The reorder point for the EOQ model is?

A) d x L
B) L
C) d
D) Q

Question 60

The EOQ model assumes that order lead time is?

A) Unknown
B) Known, but variable
C) Known and constant
D) The EOQ model makes no particular assumptions about order lead time

Question 61

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price is governed by a quantity discount structure. If the restaurant orders 100 or more units, the price per kit is $11. Below 100 units, the price is $12 per kit. What is total annual cost at the optimal order quantity?

A) $137.50
B) $6437.48
C) $68.74
D) Total annual cost cannot be determined from the information given

Question 62

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the optimal EOQ order quantity?

A) 212.5
B) 76.4
C) 525
D) 38.2

Question 63

Joe's Donut Hole wishes to estimate an appropriate reorder point for cases of a raw material used in making donut icing. The average daily demand is 2 cases. The lead time for replenishment orders is 10 days with an estimated lead time demand standard deviation of 2 cases. For a 99% service level, what should the reorder point for this item be?

A) 21.64
B) 24.66
C) 26.66
D) Reorder point cannot be determined from the information given

Question 64

Mungo Pet Supplies makes cat trees for several pet store chains. They order rolls of carpet (used to cover the trees) from a supplier. Mungo's management has decided to use an EOQ model. The annual demand for carpet is estimated to be 1,000 rolls. The purchase price per roll is $20 and estimated inventory carrying cost rate is 25%. The cost to place an order from the supplier is $30. What is the annual holding cost for the optimal order quantity?

A) $109.54
B) $600
C) $547.72
D) $273.86

Question 65

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the annual ordering cost that the restaurant should expect?

A) $120
B) $137.48
C) $76.38
D) $68.74

Question 66

Joe's Donut Hole wishes to estimate an appropriate reorder point for cases of a raw material used in making donut icing. The average daily demand is 2 cases. The lead time for replenishment orders is 10 days with an estimated lead time demand standard deviation of 1 case. For a 95% service level, what should the reorder point for this item be?

A) 20
B) 21.64
C) 22
D) Reorder point cannot be determined from the information given

Question 67

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the maximum inventory level that the restaurant should expect?

A) 212.5
B) 76.4
C) 525
D) 38.2

Question 68

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the annual carrying cost that the restaurant should expect?

A) $120
B) $137.48
C) $76.38
D) $68.74

Question 69

A retailer experiences an average daily demand of 65 units of a particular product that is managed by an EOQ inventory policy. If it takes 10 days from the time of order placement to product receipt, what is this product's reorder point?

A) 10
B) 65
C) 650
D) The reorder point cannot be determined from the information given

Question 70

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the average inventory level that the restaurant should expect?

A) 212.5
B) 76.4
C) 525
D) 38.2

Question 71

Mungo Pet Supplies makes cat trees for several pet store chains. They order fasteners for the trees from a foreign supplier (lead time is 12 days with a lead time standard deviation of 3 days). Daily demand is estimated to 400 fasteners with a standard deviation of 50 fasteners per day. For a 95% service level, what is the reorder point?

A) 4800
B) 1988
C) 6788
D) Cannot be determined from the information given

Question 72

Mungo Pet Supplies makes cat trees for several pet store chains. They order rolls of carpet (used to cover the trees) from a supplier. Mungo's management has decided to use an EOQ model. The annual demand for carpet is estimated to be 1,000 rolls. The purchase price per roll is $20 and estimated inventory carrying cost rate is 25%. The cost to place an order from the supplier is $30. What is the maximum inventory amount that Mungo can expect to hold at any one time?

A) 54.7
B) 1000
C) 109.5
D) 500

Question 73

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price per kit is $12 with an estimated carrying cost rate of 15%. The cost to place an order from the kit supplier is $10. What is the total annual cost that the restaurant should expect?

A) $120
B) $137.48
C) $76.38
D) $68.74

Question 74

Mungo Pet Supplies makes cat trees for several pet store chains. They order rolls of carpet (used to cover the trees) from a supplier. Mungo's management has decided to use an EOQ model. The annual demand for carpet is estimated to be 1,000 rolls. The purchase price per roll is $20 and estimated inventory carrying cost rate is 25%. The cost to place an order from the supplier is $30. What is the optimal order quantity?

A) 54.7
B) 1000
C) 109.5
D) 500

Question 75

Mungo Pet Supplies makes cat trees for several pet store chains. They order rolls of carpet (used to cover the trees) from a supplier. Mungo's management has decided to use an EOQ model. The annual demand for carpet is estimated to be 1,000 rolls. The purchase price per roll is $20 and estimated inventory carrying cost rate is 25%. The cost to place an order from the supplier is $30. What is the annual ordering cost for the optimal order quantity?

A) $109.54
B) $600
C) $547.72
D) $273.86

Question 76

In an EOQ model with variable demand, as the desired service level increases, how does Z change?

A) Increases
B) Decreases
C) Neither increases nor decreases
D) Cannot be determined from the information given

Question 77

Flanders Bar and Grill orders cleaning supply kits using the EOQ model. The restaurant estimates that it uses 525 kits per year. The purchase price is governed by a quantity discount structure. If the restaurant orders 100 or more units, the price per kit is $11. Below 100 units, the price is $12 per kit. What is the optimal order quantity?

A) 76.4
B) 100
C) 68.7
D) Cannot be determined from the information given

Question 78

Mungo Pet Supplies makes cat trees for several pet store chains. They order fasteners for the trees from a foreign supplier (lead time is 12 days with a lead time standard deviation of 3 days). Daily demand is estimated to 400 fasteners with a standard deviation of 50 fasteners per day. For a 95% service level, what is the reorder point?

A) 7625
B) 2825
C) 4800
D) Cannot be determined from the information given

Question 79

Mungo Pet Supplies makes cat trees for several pet store chains. They order rolls of carpet (used to cover the trees) from a supplier. Mungo's management has decided to use an EOQ model. The annual demand for carpet is estimated to be 1,000 rolls. The purchase price per roll is $20 and estimated inventory carrying cost rate is 25%. The cost to place an order from the supplier is $30. What is the total annual cost for the optimal order quantity?

A) $109.54
B) $600
C) $547.72
D) $273.86

Question 80

Mungo Pet Supplies makes cat trees for several pet store chains. They order rolls of carpet (used to cover the trees) from a supplier. Mungo's management has decided to use an EOQ model. The annual demand for carpet is estimated to be 1,000 rolls. The purchase price per roll is $20 and estimated inventory carrying cost rate is 25%. The cost to place an order from the supplier is $30. What is the average inventory amount that Mungo can expect to hold at any one time?

A) 54.7
B) 1000
C) 109.5
D) 500