Question 1

______ is the number of orders filled completely relative to the total number of orders.

Accepted Answer

The answer of ______ is the number of orders filled...

Question 2

Customer orders waiting to be processed are called an order backlog.

Accepted Answer

A) True 
 B)False

Question 3

An advantage of continuous review (Q) inventory systems relative to periodic review (P) inventory systems is that lower levels of safety stock provide savings in holding costs.

Accepted Answer

A) True 
 B)False

Question 4

A backorder is an order that cannot be filled at the time the customer places the order, resulting in a lost sale.

Accepted Answer

A) True 
 B)False

Question 5

Shutting down more frequently but for shorter periods of time for preventive maintenance will generally reduce the quantity of decoupling inventory needed.

Accepted Answer

A) True 
 B)False

Question 6

A continuous review system is sometimes called a reorder point system.

Accepted Answer

A) True 
 B)False

Question 7

Sensitivity analysis on the economic order quantity (EOQ) formula can help the operations manager answer several questions on how to manage inventories. Which one of the following questions is NOT answered by EOQ sensitivity analysis?

Accepted Answer

A)  What should happen to lot sizes if supply and lead- time uncertainty increase? 
B)  How critical are errors in estimating demand (
D) , inventory holding cost (H), and setup cost (S)? 
C)  What should happen to cycle inventory if the demand rate increases? 
D)  What should happen to lot sizes if interest rates drop?

Question 8

One of the secondary levers for reducing pipeline inventory is to

Accepted Answer

A)  increase capacity cushions. 
B)  select more responsive suppliers. 
C)  offer seasonal pricing plans. 
D)  accept only large orders.

Question 9

Protection interval is the time interval for which inventory must be planned when each new order is placed.

Accepted Answer

A) True 
 B)False

Question 10

A company is more likely to place its inventory close to customers as finished goods for standard
items than it is for special items.

Accepted Answer

A) True 
 B)False

Question 11

Table $5.9$
Demand $= 140$ units $/$ wee k
Standard deviation in weekly demand $= 21$ units 
Ordering cost $= \$ 20 /$ order
Holding cost $= \$ 1$ per unit per year 
Cycle- service level $= 85$ percent 
Lead time $= 6$ weeks
You will need to refer to a normal table to answer the question(s).
-Use the information in Table 5.9. Assume demand during lead time to be normally distributed. For a continuous review system, what should be the reorder point (R)?

Accepted Answer

A)  less than or equal to 870 
B)  greater than or equal to 870 but less than or equal to 900 
C)  greater than 900 but less than or equal to 930 
D)  more than 930

Question 12

Which of the following statements regarding a periodic review (P) system for inventory control is FALSE?

Accepted Answer

A)  Stockout protection is required for a longer time interval than continuous review systems for inventory control. 
B)  The target inventory level is set based on the average demand during the protection period plus safety stock. 
C)  The quantity ordered each time is a fixed lot size Q equal to the reorder point (R). 
D)  An item's inventory position is reviewed periodically rather than continuously.

Question 13

For a company that manufactures most of its products as standards, more inventory should be placed

Accepted Answer

A)  closer to the customer. 
B)  equally distributed between the plants and warehouses. 
C)  within the plant as work- in- process. 
D)  close to suppliers.

Question 14

Table $5.3$
The Medfield Import Autoparts Company imports and sells standard air filters for most Japanese cars, and it operates under the continuous review system. The average demand for this item is 1200 units per month ( 14,400 per year), and the standard deviation in monthly demand is 250 units. It costs the company $\$ 225$ to process each order, and the lead time is 2 months. The holding cost for one unit is $\$ 0.50$ per year, and the company policy is to maintain a 95 percent cycle- service level. You will need to refer to a normal table to answer the question(s).
-Use the information in Table 5.3. What is the EOQ (economic order quantity) for this air filter?

Accepted Answer

A)  less than or equal to 2,000 units 
B)  greater than 2,000 units but less than or equal to 3,000 units 
C)  greater than 3,000 units but less than or equal to 4,000 units 
D)  greater than 4,000 units

Question 15

The primary reason for keeping inventories low is that inventory represents a temporary monetary investment in goods on which a firm must pay interest.

Accepted Answer

A) True 
 B)False

Question 16

Pipeline inventory is inventory that is moved from point to point within the material flow system.

Accepted Answer

A) True 
 B)False

Question 17

The Franklin County Hospital is currently using a continuous review system to control its inventory. One of the items in inventory is an elastic band. The average demand for this item is 200 boxes per week, and the standard deviation in weekly demand is 50 boxes. If the lead time is 3 weeks and the hospital wants a 99 percent cycle- service level, what is the reorder point for this item? A normal table is appended to this exam.

Accepted Answer

A)  less than or equal to 650 boxes 
B)  greater than 650 boxes but less than or equal to 750 boxes 
C)  greater than 750 boxes but less than or equal to 850 boxes 
D)  greater than 850 boxes

Question 18

______ inventory accommodates the different processing rates of individual operations in a process, smoothing the flow of items.

Accepted Answer

The answer of ______ inventory accommodates the different processing rates...

Question 19

Inventory reduces the potential for stockouts and backorders.

Accepted Answer

A) True 
 B)False

Question 20

Table $5.9$
Demand $= 140$ units/week
Standard deviation in weekly demand $= 21$ units 
Ordering cost $= \$ 20$ /order
Holding cost $= \$ 1$ per unit per year 
Cycle-service level $= 85$ percent 
Lead time $= 6$ weeks
You will need to refer to a normal table to answer the question(s).
-Use the information in Table 5.9. Design a periodic review system with P = 4 weeks. Assume demand during lead time plus review period to be normally distributed. What target inventory will provide the desired cycle- service level of 85 percent?

Accepted Answer

A)  less than or equal to 1400 units 
B)  greater than or equal to 1400 but less than or equal to 1425 units 
C)  greater than 1425 but less than or equal to 1450 units 
D)  greater than 1450 units

Exam 6: Waiting Lines

______ is the number of orders filled completely relative to the total number of orders.

Customer orders waiting to be processed are called an order backlog.

An advantage of continuous review (Q) inventory systems relative to periodic review (P) inventory systems is that lower levels of safety stock provide savings in holding costs.

A backorder is an order that cannot be filled at the time the customer places the order, resulting in a lost sale.

Shutting down more frequently but for shorter periods of time for preventive maintenance will generally reduce the quantity of decoupling inventory needed.

A continuous review system is sometimes called a reorder point system.

Sensitivity analysis on the economic order quantity (EOQ) formula can help the operations manager answer several questions on how to manage inventories. Which one of the following questions is NOT answered by EOQ sensitivity analysis?

One of the secondary levers for reducing pipeline inventory is to

Protection interval is the time interval for which inventory must be planned when each new order is placed.

A company is more likely to place its inventory close to customers as finished goods for standard items than it is for special items.

Which of the following statements regarding a periodic review (P) system for inventory control is FALSE?

For a company that manufactures most of its products as standards, more inventory should be placed

The primary reason for keeping inventories low is that inventory represents a temporary monetary investment in goods on which a firm must pay interest.

Pipeline inventory is inventory that is moved from point to point within the material flow system.

______ inventory accommodates the different processing rates of individual operations in a process, smoothing the flow of items.

Inventory reduces the potential for stockouts and backorders.