Exam 6: Waiting Lines

The economic order quantity (EOQ), is the lot size that minimizes total annual inventory holding and ordering costs.

For wholesale and retail businesses, maintaining high levels of customer service translates into pressures to maintain relatively low inventory levels.

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

Table $5.8$ Demand $= 52,000$ units/year Standard deviation of weekly demand $= 110$ units Ordering costs $= \$ 45$ /order Holding costs $= \$ 0.50 /$ unit/year Cycle-service level $= 90 \%$ Lead time $= 2$ weeks Number of weeks per year $= 52$ weeks You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.8. If the firm changed to a continuous review system, what would be the reorder point?

Which one of the following statements about anticipation inventory is TRUE?

An item experiences an annual demand of 7200 units. It costs $8 to hold an item in inventory for one year and $16 to place an order. If the EOQ model is used, what is the time between orders? Assume that there are 52 business weeks in a year.

A(n) ______ is the situation that occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

Explain the meaning and significance of safety stock in managing inventory

The EOQ is the lot size that minimizes total annual inventory holding and ordering costs.

A(n) ______ system is a visual system in which an item's inventory is stored at two different locations.

Inventory is a stock of items used to satisfy customer demand or support the production of goods or services.

The degree at which all the work can be done is referred to as repeatability.

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

Cycle counting is an inventory control method whereby storeroom personnel physically count a small percent of the total number of items each day.

Service level is the desired probability of not running out of stock in any one order cycle.

A(n) ______ system is a system of inventory control in which a maximum level is marked on the storage shelf or on a measuring rod, and the inventory is brought up to the mark periodically.

The reorder point is the measurement of an item's ability to satisfy demand.

Table 5.1 Fred Jacobs, assistant manager of Home and Hearth, is reviewing the costs associated with the store's best-selling frying pan. The data available to Mr. Jacobs concerning this frying pan follow. -Use the information in Table 5.1. Jacobs has recently learned of the economic order quantity in his business management class. If Home and Hearth implemented the EOQ, which of the following statements is TRUE?

What are the pressures for high inventories?

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: -Use the information in Table 5.5. What is the economic order quantity for this item?