Exam 9: Inventory Management

What is a base-stock system?

If an item is ordered using an EOQ policy, as the annual demand for an item decreases, the EOQ for the item ________.

Which of the following generates pressure to decrease inventories?

Scenario 9.2 Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. The lead time from the plant to the wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant. -Refer to Scenario 9.2. Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 400 units?

EOQ should be used if you use a make-to-order strategy and the customer specifies that the entire order be delivered in one shipment.

Which of the following generates pressure to increase inventories?

The primary reason for keeping inventories low is that inventory represents a temporary monetary investment.

An assistant manager is reviewing the costs associated with one of the store's better-selling products. The data available follows. Demand = 400 units/year Order cost = $25/order Holding cost = 50¢/unit/year a. They currently order a one-year supply. What are the total annual ordering cost and holding cost for this order size? b. What would be the EOQ and its associated ordering and holding costs?

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

The scheduled receipts are orders that have been placed but not yet received.

As safety stock increases, the holding cost of that inventory item ________.

As the service level increases, the probability of not running out of stock during a cycle decreases.

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

When looking at inventory management, the term "lot size" refers to the quantity of an inventory item management either buys from a supplier or manufactures using internal processes.

Which of the following is not a lever for reducing cycle inventories?

Scenario 9.12 Demand = 100,000 units/year Number of days per year = 250 weeks Standard deviation of weekly demand = 50 units Average lead time = 5 days Standard deviation of lead time: 2 days Cycle-service level = 99% A continuous review system is used to control inventory. -Use the information in Scenario 9.12. What is the standard deviation of demand during lead time?

One of the secondary levers for reducing pipeline inventory is to:

Scenario 9.9 "Gollee those cats sure go through a lot of food," Geoff exclaimed as he saw the shopping list pad that had been pre-printed with the words "cat food" at the top. He pondered a different approach to shopping for the furry little darlings, reviewed his shopping records, and discovered the following. The price of cat food has held steady at 89 cents per can. Despite feigning indifference, each of the seven cats nibbles their way through an average of one can per day, three hundred sixty five days a year. The price of gasoline has held constant at $3.50 per gallon and his pickup uses a gallon each way to the cat food store. The cost to hold a can of cat food is 10% of the unit price. -Use the information in Scenario 9.9 to determine the average pantry space occupied by cat food if each can takes up 13 cubic inches and Geoff obeys an EOQ policy for managing the cat food purchase process.

A ________ lever is one that must be activated if inventory is to be reduced.

The Lemma Company manufactures and sells 10 products. Ways have been found to cut both the setup and inventory holding costs in half. What effect will this have on the economic order quantities of the 10 products?