Deck 11: Managing Inventories in Supply Chains

Question 1

In the context of inventory 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 costs
B) holding costs
C) stockout costs
D) unit costs

Answer 1

setup costs

Question 2

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

Answer 2

True

Question 3

Stable demand is usually called__________.

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

Answer 3

static demand

Question 4

Brenda is the owner of a spa store that operates 50 weeks per year. Spair Shampoo is a high margin stock keeping unit (SKU), but the product goes out of stock frequently. She decides to use a fixed-quantity system (FQS) and orders boxes of Spair Shampoo containing 10 bottles per box from a vendor 160 miles away. She collects the following data with respect to the sales of Spair Shampoo. Using the given data, it can be concluded that the economic order quantity (EOQ) of the Spair Shampoo boxes is:

A) less than 25 boxes.
B) more than 25 but less than or equal to 35 boxes.
C) more than 35 but less than or equal to 45 boxes.
D) more than 55 boxes.

Question 5

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

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

Question 6

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

Question 7

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 8

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 9

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.

Question 10

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

Question 11

A single-period inventory problem can be solved using a technique called:

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

Question 12

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.

Question 13

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 Qmust satisfy the condition _____.

A) P(demand Q*) = 1/2
B) P(demand 11ecb63f_fbda_5f0f_8f41_2750a2e31aa8_TB3330_11 Q*) = 1/3
C) P(demand 11ecb63f_fbda_5f0f_8f41_2750a2e31aa8_TB3330_11 Q*) = 1/4
D) P(demand 11ecb63f_fbda_5f0f_8f41_2750a2e31aa8_TB3330_11 Q*) = 1/5

Question 14

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the economic time interval for establishing an optimal policy for a fixed-period system (FPS) under the model assumptions is:

A) less than or equal to 3 weeks.
B) more than 3 weeks but less than or equal to 6 weeks.
C) more than 6 weeks but less than or equal to 9 weeks.
D) more than 9 weeks.

Question 15

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 16

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

Question 17

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the optimal replenishment level with safety stock for a fixed-period system (FPS) under the model assumptions is:

A) more than 1,350 but less than 1,550 units.
B) more than 1,550 but less than 1,650 units.
C) more than 1,650 but less than 1,750 units.
D) more than 1,750 but less than 1,850 units.

Question 18

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 19

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

Question 20

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

Question 21

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.

Question 22

Using the data regarding the inventory management of a stock-keeping unit shown in the following table, it can be concluded that the optimal replenishment level without any safety stock for a fixed-period system (FPS) under the model assumptions is:

A) more than 100 but less than or equal to 200 units.
B) more than 200 but less than or equal to 400 units.
C) more than 400 but less than or equal to 600 units.
D) more than 600 but less than or equal to 800 units.

Question 23

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 24

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

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

Question 25

Net Steels is a steel manufacturing company. It orders 180 metric tons of raw material per order. It was observed that the company often faces stockout. To tackle this issue, the company incorporated a fixed-quantity system (FQS) and collected the following data. Using the data, Net Steels determined that the economic order quantity (EOQ) should be 235 metric tons. In this scenario, the annual amount that Net Steels can save by ordering as per the EOQ instead of its conventional order is:

A) less than $45,000.
B) more than $45,000 but less than or equal to $55,000.
C) more than $55,000 but less than or equal to $65,000.
D) more than $65,000.

Question 26

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

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

Question 27

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 _____.

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

Question 28

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

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

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 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 31

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 _____.

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

Question 32

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 33

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 34

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 35

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

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

Question 36

__________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