Question 1

The new medical supply discounter, Life Alert Inc., provides a certain type of titanium stent which costs $5,000. The annual holding cost rate is 25 percent, annual demand is 600, and the order cost is $200 per order. The lead time is 3 days. Because demand is variable (the patients may not always be ready for surgery), Life Alert has decided to establish a customer service level of 95 percent. The distributor is open 300 days per year.
A) What is the optimal order quantity?
B) What is the safety stock?
C) What is the reorder point?

Accepted Answer

The answer of The new medical supply discounter, Life Alert...

Question 2

In the basic EOQ model, if the annual demand increases by nine times and all other values remain constant, the EOQ will

Accepted Answer

A)  be difficult to determine without more information 
B)  increase by three times 
C)  either increase or decrease 
D)  decrease by one-third of the previous EOQ

Question 3

The typical inventory model is concerned with answering the two most basic questions, which are

Accepted Answer

A)  when to buy and the total cost of ordering 
B)  how much to buy and the cycle service level 
C)  how much to buy and when to buy 
D)  the total ordering cost and the total holding cost

Question 4

An increase in inventory turnover is bad news for the manufacturer or retailer.

Accepted Answer

A) True 
 B)False

Question 5

Comfort Stayz Inns orders miniature shampoos for guest bathrooms on a periodic basis. Based on convenience, it decides to review its stockroom inventory of these shampoos every four weeks. The shampoo supplier takes nine days to supply an order. The hotel observes that the average daily demand for the shampoos is 50 per day, with a standard deviation of 6 shampoos. It wishes to maintain an average CSL of 95 percent for this product. What is the TIP?

Accepted Answer

The answer of Comfort Stayz Inns orders miniature shampoos for...

Question 6

XYZ Computing has been trying to reduce their inventory holding costs. Which of the following practices would not help them achieve this goal?

Accepted Answer

A)  de-cluttering their warehouse so as to have better inventory accountability 
B)  ordering a larger number of the hottest selling computers 
C)  using RFID chips to track the movement of inventory 
D)  none of the above will help

Question 7

Businesses carry inventory because of the certainty of demand.

Accepted Answer

A) True 
 B)False

Question 8

The availability of substitute products lowers the cost of stock-outs.

Accepted Answer

A) True 
 B)False

Question 9

Identify and discuss two recent trends in inventory management.

Accepted Answer

The answer of Identify and discuss two recent trends in...

Question 10

The periodic review model works best for A category items (in ABC analysis) because those items tend to move the fastest.

Accepted Answer

A) True 
 B)False

Question 11

The purpose of safety stock is to

Accepted Answer

A)  control the likelihood of a stock-out due to the variability of demand during lead time 
B)  always have replacement items in case of defects 
C)  maintain quality standards 
D)  guard against dramatic decreases in demand

Question 12

The objective of the basic economic order quantity model is to

Accepted Answer

A)  minimize the total of the holding and ordering costs 
B)  maximize the order quantity to prevent stock-outs 
C)  minimize the number of orders placed 
D)  calculate the reorder point to avoid shortages

Question 13

ABC analysis classifies on-hand inventory into three categories based upon the

Accepted Answer

A)  unit price 
B)  total dollar sales of an item 
C)  number of units on hand 
D)  rate of turnover

Question 14

The _________ model recommends a specific (recurring) order quantity that minimizes the sum of holding cost and ordering cost.

Accepted Answer

The answer of The _________ model recommends a specific (recurring)...

Question 15

Lot-for-lot (LFL) and flat ordering are two inventory order size recommendation policies.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements regarding the reorder point (ROP) model is true?

Accepted Answer

A)  The model tells us that it is the time to buy. 
B)  The model does not tells us how much to buy. 
C)  The model continuously reviews the inventory position and triggers an order as soon as the inventory position falls to the preset reorder point. 
D)  All of the above are true.

Question 17

Indirect costs of holding inventory include risk of product obsolescence, stifling of innovation, and clutter and disorganization.

Accepted Answer

A) True 
 B)False

Question 18

Perishable inventory requires

Accepted Answer

A)  heating and newspapers 
B)  well-designed and highly accurate forecasting 
C)  entities that can be converted, digitalized, and stored 
D)  none of the above

Question 19

The need for inventory lessens as the uncertainty in future demand, prices, and product availability diminishes.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is not true of inventory management?

Accepted Answer

A)  Inventory management is a data-driven approach to making intelligent cost and customer service driven decisions. 
B)  The goal, in most cases, is to generate revenue by minimizing stock-outs while keeping costs at a reasonable level. 
C)  If Jimmy became unavailable all of a sudden, the business has no inventory management system. 
D)  Smaller-sized operations are especially vulnerable to inventory risks.

Exam 8: Managing Inventory

In the basic EOQ model, if the annual demand increases by nine times and all other values remain constant, the EOQ will

The typical inventory model is concerned with answering the two most basic questions, which are

An increase in inventory turnover is bad news for the manufacturer or retailer.

XYZ Computing has been trying to reduce their inventory holding costs. Which of the following practices would not help them achieve this goal?

Businesses carry inventory because of the certainty of demand.

The availability of substitute products lowers the cost of stock-outs.

Identify and discuss two recent trends in inventory management.

The periodic review model works best for A category items (in ABC analysis) because those items tend to move the fastest.

The purpose of safety stock is to

The objective of the basic economic order quantity model is to

ABC analysis classifies on-hand inventory into three categories based upon the

The _________ model recommends a specific (recurring) order quantity that minimizes the sum of holding cost and ordering cost.

Lot-for-lot (LFL) and flat ordering are two inventory order size recommendation policies.

Which of the following statements regarding the reorder point (ROP) model is true?

Indirect costs of holding inventory include risk of product obsolescence, stifling of innovation, and clutter and disorganization.

Perishable inventory requires

The need for inventory lessens as the uncertainty in future demand, prices, and product availability diminishes.

Which of the following is not true of inventory management?