Exam 5: Inventory Management

What assumptions are made in calculating the economic order quantity?

Which statement regarding special items is FALSE?

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

On-hand inventory of an item is only 10 units,and the reorder point R is 135.There are no backorders,and an open order of 110 units is scheduled to arrive next week.Which one of the following statements is TRUE?

________ is the cost involved in changing over a machine to produce a different component or item.

Assuming equivalent lead times,the period that stockout protection is needed because of demand uncertainty is longer in a periodic review (P)inventory system than in a continuous review (Q)inventory system.

Which one of the following statements represents an advantage of the P system over the Q system?

Table 5.6 Peterson Enterprises uses a continuous review inventory control system. The firm operates 50 weeks per year and has the following characteristics for an item: Demand = 50,000 units/year Ordering cost = $35/order Holding cost = $2/unit/year Lead time = 3 weeks Standard deviation in weekly demand = 125 units You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.6.If Peterson wishes to provide a 90 percent cycle-service level,what is the reorder point?

A perpetual inventory system is a system of inventory control in which the inventory records are always current.

What are the secondary levers for safety stock inventory?

Table 5.5 You are the operations manager of a firm that uses the continuous review inventory control system. Suppose the firm operates 52 weeks a year and has the following characteristics for its primary item: Demand = 25,000 units/year Ordering cost = $30/order Holding cost = $8/unit/year Lead time = 2 weeks Standard deviation in weekly demand = 100 units You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.5.What safety stock level provides a 95 percent cycle-service level?

________ is the predetermined minimum level that an inventory position must reach before a fixed quantity (Q)is ordered.

A store has collected the following information on one of its products: Demand = 4500 units/year Standard deviation of weekly demand = 12 units Ordering costs = $40/order Holding costs = $3/unit/year Cycle-service level = 90% (z for 90% = 1.28) Lead time = 2 weeks Number of weeks per year = 52 weeks a.If a firm uses the continuous review system to control the inventory,what would be the order quantity and reorder point? b.The firm decided to change to the periodic review system to control the item's inventory.For the most recent review,an inventory clerk checked the inventory of this item and found 300 units.There were no scheduled receipts at the time.How many units should be ordered? (HINT: Use the EOQ model to derive P,the time between reviews.)

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

Generally,the setup cost associated with producing a number of components to be held in inventory is independent of the order size.

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.

What are the secondary levers for anticipation inventory?

As the setup cost (S)increases,the economic order quantity (EOQ)decreases.

Perpetual inventory is a system of inventory control in which the inventory records are obsolete.

Safety stock inventory is the portion of total inventory that varies directly with lot size.