Deck 13: Inventory Management

Question 1

The number of daily calls received by a help desk between the hours of 9:00 a.m. and 10:00 a.m. can be described by the following probability distributions: Based on the distribution of calls above, the expected value, or average number of calls to the help desk between 9:00 a.m. and 10:00 a.m. is

A) 61.5
B) 62.0
C) 62.5
D) 63.0

Answer 1

63.0

Question 2

The ___ technique selects numbers randomly from a probability distribution for being used in a trial run of a simulation.

A) Computer World
B) Monaco
C) steady-state
D) none of the above

Answer 2

none of the above

Question 3

An advantage of using a computer versus a manual approach, when performing a simulation, is that it often takes only seconds versus hours to reach a steady-state result.

Answer 3

True

Question 4

As a simulation model becomes more complex, using a computer application is virtually impossible.

Question 5

Simulation is a popular decision-making tool that provides a solution to any type of problem.

Question 6

After a sufficient number of simulation runs, a steady state results when the variable being investigated reaches an ___ value that remains constant.

A) optimal
B) average
C) expected
D) estimated

Question 7

The weekly demand for a company's product follows the probability distribution below: The expected value, or average, weekly demand is

A) 137.50
B) 142.50
C) 153.75
D) 165.75

Question 8

Simulation is the preferred technique for problems with random variables represented by the probability distributions.

Question 9

Simulation analysis is useful for operational problems that

A) are easy to solve analytically
B) cannot be solved analytically
C) require an optimal solution
D) meet specific analytical criteria

Question 10

Because simulation is used to analyze probabilistic problems, it provides information that is used to make a decision versus an optimal solution.

Question 11

A random number's likelihood of being selected is based on a normal distribution.

Question 12

The number of daily calls received by a help desk between the hours of 9:00 a.m. and 10:00 a.m. can be described by the following probability distributions: Use the following random numbers to simulate the number of calls to the help desk between 9:00 a.m. and 10:00 a.m. for the next five days: 39, 55, 18, 16, 70.
If the first random number interval begins with 1, then the number of calls that would be simulated for day 3 is

A) 50
B) 55
C) 60
D) 65

Question 13

The Monte Carlo technique selects numbers randomly from a probability distribution for being used in a quantitative model.

Question 14

At a Walmart store, simulation can be used to analyze waiting lines at the check-out stands to determine the required staffing levels.

Question 15

Simulation is often viewed as the technique of last resort because it can be applied to situations when there is no applicable quantitative model.

Question 16

The weekly demand for a company's product follows the probability distribution below: Use the following random numbers to simulate the product's demand for the next five weeks: 72, 27, 93, 17, 47.
If the first random number interval begins with 1, then the total demand for the simulated five-week period is

A) 700
B) 650
C) 625
D) 550

Question 17

The weekly demand for a company's product follows the probability distribution below: Use the following random numbers to simulate the product's demand for the next five weeks: 72, 27, 93, 17, 47.
If the first random number interval begins with 1, then the average weekly demand for the simulated five-week period is

A) 137.50
B) 140.00
C) 142.50
D) 152.50

Question 18

Simulation analysis is the preferred method used at hospitals to determine the type of treatment a patient requires.

Question 19

The Monte Carlo technique is a mathematical model used within a simulation.

Question 20

A steady state results, when a simulation is repeated enough times that the random variable being investigated, reaches an average result that remains constant.

Question 21

Simulations applied to plant layout or assembly line balancing comprise which type of operational problem?

A) queuing
B) production and manufacturing systems
C) service operations
D) waiting lines/service

Question 22

The number of daily calls received by a help desk between the hours of 9:00 a.m. and 10:00 a.m. can be described by the following probability distributions: Use the following random numbers to simulate the number of calls to the help desk between 9:00 a.m. and 10:00 a.m. for the next five days: 39, 55, 18, 16, 70.
If the first random number interval begins with 1, then the average number of calls received over the simulated five-day period is

A) 63
B) 62
C) 61
D) 60

Question 23

Which of the following is not a common application for simulations in operations management?

A) waiting lines/service
B) inventory management
C) logistics
D) service standards development

Question 24

Calculate the order quantity for a periodic inventory system.

Question 25

In what ways is simulation relevant to analyzing production problems?

Question 26

Contrast continuous and periodic inventory systems and classify inventory according to the ABC system.

Question 27

The number of daily calls received by a help desk between the hours of 9:00 a.m. and 10:00 a.m. can be described by the following probability distributions: Use the following random numbers to simulate the number of calls to the help desk between 9:00 a.m. and 10:00 a.m. for the next five days: 39, 55, 18, 16, 70.
If the first random number interval begins with 1, then the total number of calls received over the simulated five-day period is

A) 375
B) 350
C) 325
D) 300

Question 28

What is simulation and why is it a popular decision-making tool?

Question 29

Determine if an order size with a quantity discount is more cost effective than the EOQ.

Question 30

The weekly capacity measured in machine hours for a small machine shop follows the probability distribution shown below: Based on the probability distributions above, the expected value, or average hours of weekly capacity for the machine shop is

A) 500 hours
B) 490 hours
C) 480 hours
D) 475 hours

Question 31

Seasonal inventory allows a firm to maintain a smooth production flow throughout the year.

Question 32

Problems that typically include random variables such as distance, different modes of transportation, and schedules are generally considered _____ problems.

A) production and manufacturing systems
B) logistics
C) service operations
D) environmental and resource analysis

Question 33

Explain why companies keep inventory and how advances in IT have impacted inventory decisions.

Question 34

Discuss the key elements of costs and inventory, and the relationship between inventory costs and customer service.

Question 35

Use the basic economic order quantity (EOQ) model and the economic production quantity (EPQ) model to calculate optimal order/production quantity and related values in a continuous inventory system.

Question 36

Determine the appropriate reorder point in a continuous inventory system based on a target service level.

Question 37

Problems that require estimates of cash flows resulting from random variables are known as _____ problems.

A) production and manufacturing systems
B) logistics
C) capital investment and budgeting
D) inventory management

Question 38

The operations of police departments, post office, and airports are studied in what type of simulation?

A) logistics
B) environmental and resources analysis
C) service operations
D) waiting lines/service

Question 39

Determine the optimal order quantity for a single-period inventory model.

Question 40

The weekly capacity measured in machine hours for a small machine shop follows the probability distributions shown below: Use the following random numbers to simulate weekly capacity for the machine shop for the next five weeks: 93, 31, 71, 8, 6.
If the first random number interval begins with 1, then the minimum capacity for the simulated five-week period is

A) 560.
B) 520.
C) 440.
D) 400.

Question 41

As the level of inventory increases to provide better customer service, quality-related customer service costs decrease.

Question 42

Carrying costs and ordering costs are inversely related.

Question 43

The three basic costs associated with inventory are holding costs, ordering costs and shortage costs.

Question 44

Buffer inventories provide independence between different stages of the production process.

Question 45

Product deterioration, spoilage, breakage, and obsolescence are examples of shortage costs.

Question 46

The time between orders is variable and the order quantity is constant in the periodic inventory system.

Question 47

Dependent demand is determined by external market conditions.

Question 48

Dependent demand items consist of component parts or materials used in the production process to produce a final product.

Question 49

Finished product is an example of a dependent demand item.

Question 50

Continuous inventory systems often incorporate information technology to improve the speed and accuracy of data entry and retrieval.

Question 51

Inventory can take the form of tools and equipment.

Question 52

The ABC classification system is a method for classifying inventory based on the percentage of total value and the percentage of total quantity.

Question 53

Class A items in the ABC classification system require less monitoring and control than Class C items.

Question 54

The conventional approach to inventory management is to maintain a level of inventory that reflects a compromise between inventory cost and customer service.

Question 55

Inventory management is concerned with how much to order and when to order.

Question 56

The reorder point is the level of inventory that prompts a new order to be placed in a continuous inventory system.

Question 57

Hedging involves buying larger amounts of inventory in anticipation of future price increases.

Question 58

Shortage costs are easier to determine than carrying costs or ordering costs.

Question 59

Dependent demand items are typically products for use by the final customer.

Question 60

Carrying costs are more difficult to determine than ordering or shortage costs.

Question 61

The EOQ model determines the optimal order size that minimizes the sum of carrying cost and shortage costs.

Question 62

In ABC analysis, each class of inventory requires different levels of inventory monitoring and control.

Question 63

The order cycle is the time between receipts of orders in an inventory cycle.

Question 64

The number of orders can be calculated by dividing the daily demand rate, d, by the order quantity, Q.

Question 65

The quantity discount model evaluates whether using an order size which qualifies for a price discount is always less cost effective than using the economic order quantity.

Question 66

With the economic order quantity (EOQ) model, increasing the order quantity reduces inventory carrying cost.

Question 67

For a given annual demand, total annual ordering cost is independent of order size.

Question 68

The order quantity for a periodic inventory system remains constant.

Question 69

The average inventory can be calculated by dividing the annual demand, D, by 2.

Question 70

When demand is uncertain, a safety stock is often added to the expected demand during lead time to prevent a stock-out.

Question 71

Maintaining a desired service level influences the level of safety stock.

Question 72

Periodic inventory systems initiate a new order when the level of inventory falls into the reorder point.

Question 73

The economic order quantity (EOQ) model determines the optimal order size that minimizes total annual inventory costs.

Question 74

The production quantity model, a variation of the basic EOQ model, assumes non-instantaneous replenishment.

Question 75

The periodic inventory system is often preferred for high quantity, low value items.

Question 76

A quantity discount is a price discount available if a predetermined number of units is ordered.

Question 77

Continuous inventory systems are primarily intended for lower cost items because they are easier to use requiring fewer resources.

Question 78

The economic order quantity occurs when the annual carrying cost is equal to the annual ordering cost.

Question 79

Continuous inventory systems are also referred to as a fixed-order-quantity system.

Question 80

With the economic order quantity (EOQ) model, the number of orders increases as the order size decreases.