Question 1

The main trait of a single-period model is that

Accepted Answer

A) inventory has limited value after a certain period of time. 
B) it has the largest EOQ sizes. 
C) the order quantity should usually equal the expected value of demand. 
D) supply is limited. 
E) inventory has substantial value after a certain period of time.

Question 2

The soft goods department of a large department store sells 175 units per month of a certain large bath towel.The unit cost of a towel to the store is $2.50 and the cost of placing an order has been estimated to be $12.00.The store uses an inventory carrying charge of 27% per year.Determine the optimal order quantity,order frequency,and the annual cost of inventory management.If,through automation of the purchasing process,the ordering cost can be cut to $4.00,what will be the new economic order quantity,order frequency,and annual inventory management cost? Explain these results.

Accepted Answer

The answer of The soft goods department of a large...

Question 3

Q is to ________ systems as P is to ________ systems.

Accepted Answer

A) fixed quantity;fixed period 
B) variable demand;constant demand 
C) variable lead time;variable demand 
D) variable quantity;variable period 
E) quantitative;periodic

Question 4

Demand for a product is approximately normal,averaging 5 units per day with a standard deviation of 1 unit per day.Lead time for this product is approximately normal,averaging 10 days with a standard deviation of 3 days.What reorder point provides a service level of 90%?

Accepted Answer

The answer of Demand for a product is approximately normal,averaging...

Question 5

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division.Perform ABC analysis on the data.Which products do you suggest the firm keep the tightest control over? Explain.

Accepted Answer

The answer of Your company has compiled the following data...

Question 6

Among the advantages of cycle counting is that it

Accepted Answer

A) makes the annual physical inventory more acceptable to management. 
B) does not require the detailed records necessary when annual physical inventory is used. 
C) does not require highly trained people. 
D) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. 
E) does not need to be performed for less expensive items.

Question 7

A firm that makes electronic circuits has been ordering a certain raw material 250 ounces at a time.The firm estimates that carrying cost is 30% per year,and that ordering cost is about $20 per order.The current price of the ingredient is $200 per ounce.The assumptions of the basic EOQ model are thought to apply.For what value of annual demand is their action optimal?

Accepted Answer

The answer of A firm that makes electronic circuits has...

Question 8

For a certain item,the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup)cost was $600.The inventory carrying cost per unit per year for this item is

Accepted Answer

A) $1.50. 
B) $2.00. 
C) $3.00. 
D) $150.00. 
E) not enough data to determine

Question 9

Most inventory models attempt to minimize

Accepted Answer

A) the likelihood of a stockout. 
B) the number of items ordered. 
C) total inventory based costs. 
D) the number of orders placed. 
E) the safety stock.

Question 10

List the typical cost components that constitute ordering costs in inventory systems.

Accepted Answer

The answer of List the typical cost components that constitute...

Question 11

Which category of inventory holding costs is much higher than average for rapid-change industries such as PCs and cell phones?

Accepted Answer

A) housing costs 
B) material handling costs 
C) labour cost 
D) parts cost 
E) pilferage,scrap,and obsolescence

Question 12

In the production order quantity model,the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Accepted Answer

The answer of In the production order quantity model,the fraction...

Question 13

Compare the assumptions of the production order quantity model to those of the basic EOQ model.

Accepted Answer

The answer of Compare the assumptions of the production order...

Question 14

In the simple EOQ model,if annual demand were to increase,the EOQ would increase proportionately.

Accepted Answer

A) True 
 B)False

Question 15

In the production order quantity (POQ)model,inventory does not arrive in a single moment but flows in at a steady rate,resulting in a larger lot size than in an otherwise identical EOQ problem.

Accepted Answer

A) True 
 B)False

Question 16

A product has a reorder point of 110 units,and is ordered four times a year.The following table shows the historical distribution of demand values observed during the reorder period.
  Managers have noted that stockouts occur 30% of the time with this policy,and question whether a change in inventory policy,to include some safety stock,might be an improvement.The managers realize that any safety stock would increase the service level,but are worried about the increased costs of carrying the safety stock.Currently,stockouts are valued at $20 per unit per occurrence,while inventory carrying costs are $10 per unit per year.What is your advice? Do higher levels of safety stock add to total costs,or not? What level of safety stock is best?

Accepted Answer

The answer of A product has a reorder point of...

Question 17

Assume two inventory problems with identical demand,holding cost,and setup cost.In one,goods arrive instantly,but in the other goods arrive at a measurable rate.Which of these problems will have the larger optimal order quantity? Why?

Accepted Answer

The answer of Assume two inventory problems with identical demand,holding...

Question 18

If daily demand is constant at 10 units per day,and lead time averages 12 days with a standard deviation of 3 days,95% service requires a safety stock of approximately

Accepted Answer

A) 28 units. 
B) 30 units. 
C) 49 units. 
D) 59 units. 
E) 114 units.

Question 19

What is a fixed-period system?

Accepted Answer

The answer of What is a fixed-period system?...

Question 20

An organization has had a policy of ordering 70 units at a time.Their annual demand is 340 units,and the item has an annual carrying cost of $2.The assumptions of the EOQ are thought to apply.For what value of ordering cost would this order size be optimal?

Accepted Answer

The answer of An organization has had a policy of...

Exam 12: Inventory Management