Exam 6: Waiting Lines

Which one of the following is NOT a method for tracking inventory and assuring accurate records?

Table $5.7$ Demand $= 5200$ units/year Standard deviation of weekly de mand $= 11$ units Ordering costs $= \$ 45 /$ order Holding costs $= \$ 2 /$ unit/year Cycle-service level $= 90 \% ($ z for $90 \% = 1.28 )$ Lead time $= 3$ weeks Number of weeks per year $= 52$ weeks -Use the information in Table 5.7. If a firm uses the continuous review system to control the inventory, what would be the reorder point?

Which one of the following statements regarding the economic order quantity (EOQ) is TRUE?

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

What is an optional replenishment system?

Your firm uses a continuous review system (Q system), where the inventory position is updated after every transaction. The firm operates 52 weeks per year. One of the items has the following characteristics: Demand $= 14,560$ units per year Ordering cost $= \$ 40$ per order Holding cost $= \$ 6$ per unit per year Lead time $= 2$ weeks Standard deviation in weekly demand $= 100$ units Cycle-service level $= 80$ percent If Q is made equal to the EOQ, what are the desired values for Q and R?

______ inventory is the surplus inventory that a company holds to protect against uncertainties in demand, lead time, and supply.

The ______ is the average elapsed time between receiving replenishment orders of Q units for a particular lot size.

Typically, the cost of capital is not a significant component of the holding cost for inventory.

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

The ______ is the measurement of an item's ability to satisfy future demand.

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?

Table $5.4$ A company operating under a continuous review system has an average demand of 50 units per week for the item it produces. The standard deviation in weekly demand is 20 units. The lead time for the item is 6 weeks, and it costs the company $\$ 30$ to process each order. The holding cost for each unit is $\$ 10$ per year. The company operates 52 weeks per year. You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.4. What is the reorder point if the company finally decides to have a 95 percent cycle- service level?

Compare and contrast the continuous review (Q) and the periodic review (P) systems of inventory control.

Wood County Hospital consumed 400 boxes of bandages per week last year. The price of bandages was $80 per box, and the hospital operates 52 weeks per year. The cost of processing an order was $64, and the cost of holding one box throughout a full year was 20 percent of the value of the material. Last year the hospital ordered bandages, on average, once every two weeks, each time ordering 800 boxes. What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied?

______ inventory is the inventory moving from point to point in the materials flow system.

Table $5.2$ Consider the following data for an independent demand item maintained by Vicki Crittenden, the proprietor of a local auto repair shop: -Use the information in Table 5.2. Due to new ordering procedures initiated by Crittenden, the ordering cost is dropping to $4/order. At the same time, the weekly demand increases to 64 units per week due to an increase in business. What effect do these changes have on the EOQ quantity for this item?

Table $5.8$ Demand $= 52,000$ units/year Standard deviation of w eekly 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. What is the EOQ for this item?

The goal of ABC analysis is to

Elimination of products with ______ and ______ are two ways that poorly managed inventory creates environmental waste.