Exam 6: Waiting Lines

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

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

One component of the holding cost of inventory is interest.

Which one of the following statements about inventory control systems is best?

A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

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

Reducing the lead times associated with purchasing or producing items has no impact on the level of safety stock inventory.

What are the secondary levers for cycle inventory?

Which one of the following reasons creates a pressure for reducing inventories?

______ analysis is the process of dividing items into three classes according to their dollar usage so that managers can focus on items that have the higher dollar value.

______ is an inventory control method whereby storeroom personnel physically count a small percentage of the total number of items each day, correcting errors that they find.

Holding inventory at the raw materials level rather than as finished goods reduces the cost of carrying inventory but also results in longer delivery times.

For a given level of annual demand (D), as lot sizes (Q) increase there is a trade off between higher holding costs and lower ordering or setup costs.

Which one of the following statements about inventory control systems is TRUE?

Table $5.3$ The Medfield Import Autoparts Company imports and sells standard air filters for most Japanese cars, and it operates under the continuous review system. The average demand for this item is 1200 units per month ( 14,400 per year), and the standard deviation in monthly demand is 250 units. It costs the company $\$ 225$ to process each order, and the lead time is 2 months. The holding cost for one unit is $\$ 0.50$ per year, and the company policy is to maintain a 95 percent cycle- service level. You will need to refer to a normal table to answer the question(s). -Use the information in Table 5.3. What is the reorder point R to satisfy a 95 percent cycle- service level?

What is a base- stock system?

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 desired safety stock level if the company has a policy of maintaining a 90 percent cycle- service level?

What are the secondary levers for pipeline inventory?

A(n) ______ is an item made to order or, if purchased, is bought to order.

One of the ways that the poorly managed inventory creates environmental waste is through products that have "best before date."