Question 1

If the variance of orders of a manufacturer equals 800, and the variance of orders of its supplier equals 850, what is happening at this part of the supply chain?

Accepted Answer

A)  The bullwhip effect is present. 
B)  The supplier is providing a dampening (anti-bullwhip) effect. 
C)  The bullwhip measure for the supplier equals 1.067 
D)  Neither amplification nor smoothing is present. 
E)  Both amplification and smoothing are present. 
A)  The bullwhip effect is present. 
B)  The supplier is providing a dampening (anti-bullwhip) effect. 
C)  The bullwhip measure for the supplier equals 1.067 
D)  Neither amplification nor smoothing is present. 
E)  Both amplification and smoothing are present.

Question 2

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as tablets and smart phones?

Accepted Answer

A)  housing costs 
B)  material handling costs 
C)  labor cost 
D)  investment costs 
E)  pilferage, scrap, and obsolescence 
A)  housing costs 
B)  material handling costs 
C)  labor cost 
D)  investment costs 
E)  pilferage, scrap, and obsolescence

Question 3

ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.

Accepted Answer

A) True 
 B)False

Question 4

Among the advantages of cycle counting is that it:

Accepted Answer

A)  makes the annual physical inventory more acceptable to management. 
B)  does not require the detailed records necessary when annual physical inventory is used. 
C)  does not require highly trained people. 
D)  allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. 
E)  does not need to be performed for less expensive items. 
A)  makes the annual physical inventory more acceptable to management. 
B)  does not require the detailed records necessary when annual physical inventory is used. 
C)  does not require highly trained people. 
D)  allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. 
E)  does not need to be performed for less expensive items.

Question 5

Suppose that in month 1, both the retailer and the wholesaler in a supply chain ordered 20,000 units. Then in month 2, the retailer decreases its order size by 500 units. If the wholesaler then decreases its order size in month 2 by 700 units, which of the following is TRUE?

Accepted Answer

A)  The wholesaler is contributing to the bullwhip effect. 
B)  The wholesaler is providing a dampening (anti-bullwhip) effect. 
C)  The bullwhip measure for the wholesaler equals 0.70. 
D)  Neither amplification nor smoothing is present. 
E)  The wholesaler is providing both amplification and smoothing. 
A)  The wholesaler is contributing to the bullwhip effect. 
B)  The wholesaler is providing a dampening (anti-bullwhip) effect. 
C)  The bullwhip measure for the wholesaler equals 0.70. 
D)  Neither amplification nor smoothing is present. 
E)  The wholesaler is providing both amplification and smoothing.

Question 6

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

Accepted Answer

A)  a stockout can occur during the review period as well as during the lead time. 
B)  this model is used for products that have large standard deviations of demand. 
C)  this model is used for products that require very high service levels. 
D)  replenishment is not instantaneous. 
E)  setup costs and holding costs are large. 
A)  a stockout can occur during the review period as well as during the lead time. 
B)  this model is used for products that have large standard deviations of demand. 
C)  this model is used for products that require very high service levels. 
D)  replenishment is not instantaneous. 
E)  setup costs and holding costs are large.

Question 7

If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95% service requires how much safety stock?

Accepted Answer

A)  28 units 
B)  30 units 
C)  49 units 
D)  59 units 
E)  114 units 
A)  28 units 
B)  30 units 
C)  49 units 
D)  59 units 
E)  114 units

Question 8

Which of the following is NOT a remedy for the bullwhip effect?

Accepted Answer

A)  share demand information 
B)  channel coordination 
C)  order batching 
D)  price stabilization 
E)  allocate orders based on past demand 
A)  share demand information 
B)  channel coordination 
C)  order batching 
D)  price stabilization 
E)  allocate orders based on past demand

Question 9

Service level is the complement of the probability of a stockout.

Accepted Answer

A) True 
 B)False

Question 10

A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides an 85% service level?

Accepted Answer

A)  41 
B)  26 
C)  133 
D)  126 
E)  165 
A)  41 
B)  26 
C)  133 
D)  126 
E)  165

Question 11

A two-bin system is a variation of the ________ system.

Accepted Answer

The answer of A two-bin system is a variation of...

Question 12

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Over which products do you suggest the firm keep the tightest control? Explain.

Accepted Answer

T33 and U44 represent almost 90% of the

Question 13

Suppose that the manager of a company has estimated the probability of a super-event sometime during the next three years that will disrupt all suppliers as 2%. In addition, the firm currently uses four suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next three years to be 10%. Supplier management costs during this period are $30,000 per supplier. The financial cost incurred if all four suppliers are disrupted at the same time is estimated to be $10,000,000. What is the expected monetary value (cost) of the current supplier diversification arrangement?

Accepted Answer

A)  $320,980 
B)  $415,680 
C)  $10,120,000 
D)  $318,568 
E)  $8,240,000 
A)  $320,980 
B)  $415,680 
C)  $10,120,000 
D)  $318,568 
E)  $8,240,000

Question 14

Work-in-process inventory describes components that have been purchased but not processed.

Accepted Answer

A) True 
 B)False

Question 15

In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Accepted Answer

demand rat

Question 16

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days. Demand during this period averages 100 units per day. What would be an appropriate reorder point?

Accepted Answer

Reorder point = dema

Question 17

How sensitive is the EOQ to variations in demand or costs?

Accepted Answer

The EOQ is relatively insensitive to sma

Question 18

In the production order quantity model, the cost of acquiring goods (product cost) is a factor in determining lot size.

Accepted Answer

A) True 
 B)False

Question 19

According to the global company profile, Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.

Accepted Answer

A) True 
 B)False

Question 20

Research suggests that shoppers are more likely to make a purchase from displays with many products than the ones with a more limited selection.

Accepted Answer

A) True 
 B)False

Exam 11: Inventory Management

If the variance of orders of a manufacturer equals 800, and the variance of orders of its supplier equals 850, what is happening at this part of the supply chain?

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as tablets and smart phones?

ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.

Among the advantages of cycle counting is that it:

Suppose that in month 1, both the retailer and the wholesaler in a supply chain ordered 20,000 units. Then in month 2, the retailer decreases its order size by 500 units. If the wholesaler then decreases its order size in month 2 by 700 units, which of the following is TRUE?

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95% service requires how much safety stock?

Which of the following is NOT a remedy for the bullwhip effect?

Service level is the complement of the probability of a stockout.

A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides an 85% service level?

A two-bin system is a variation of the ________ system.

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Over which products do you suggest the firm keep the tightest control? Explain.

Work-in-process inventory describes components that have been purchased but not processed.

In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of ________.

Lead time for one of Montegut Manufacturing's fastest moving products is 4 days. Demand during this period averages 100 units per day. What would be an appropriate reorder point?

How sensitive is the EOQ to variations in demand or costs?

In the production order quantity model, the cost of acquiring goods (product cost) is a factor in determining lot size.

According to the global company profile, Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.

Research suggests that shoppers are more likely to make a purchase from displays with many products than the ones with a more limited selection.

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