Exam 11: Inventory Management

A toy manufacturer makes its own wind-up motors, which are then put into its toys. While the toy manufacturing process is continuous, the motors are intermittent flow. Data on the manufacture of the motors appears below. Annual demand (D) = 25,000 units Daily subassembly production rate = 1,000 Setup cost (S) = $85 per batch Daily subassembly usage rate = 400 Carrying cost = $2.00 per unit per year (a) To minimize cost, how large should each batch of subassemblies be? (b) Approximately how many days are required to produce a batch? (c) How long is a complete cycle? (d) What is the average inventory for this problem? (e) What is the total annual inventory cost (holding plus setup) of the optimal behavior in this problem?

In the EOQ model, for a given level of demand, annual holding cost is larger as the order quantity is ________.

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

What technique does the text use to determine the best number of suppliers to manage disaster risk?

When using the factor weighting approach, most companies will use the same list of criteria and the same criteria weights.

Which of the following would NOT generally be a motive for a firm to hold inventories?

Which of the following statements about ABC analysis is FALSE?

Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 80 units per day, while demand is 60 units per day. Holding costs are $5.00 per unit per year, and setup cost is $200.00. (a) If the firm wishes to produce this product in economic batches, what size batch should be used? (b) What is the maximum inventory level? (c) How many order cycles are there per year? (d) What are the total annual setup and holding costs?

Which of the following statements about the basic EOQ model is TRUE?

Inventory that separates various parts of the production process performs a(n) ________ function.

Consider the all-units quantity discount schedule below. Which of the following sets of order quantities is guaranteed to contain the optimal solution (i.e., best order quantity)?

Consider two inventory problems with identical demand, holding cost, and setup cost. In one, goods arrive instantly, but in the other goods arrive at a measurable rate. Which of these problems will have the larger optimal order quantity? Why?

Consider a local club selling Christmas trees. If trees cost $20 and sell for $70 with no salvage value, what is the ideal service level? If salvage value is increased to $5, what is the change in service level?

Suppose that a product's value is $1000. The manufacturer experiences a holding cost of 2.5% per month. The firm ships the product across country by truck, and it arrives seven days later. The shipping cost is $80 per unit. What is the holding cost on each unit shipped? (Assume 30 days per month.)

What is a fixed-period system?

The items listed below are stored in a one-dock warehouse. Which of them should be stored at the very front (closest to the dock)?

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

In a safety stock problem where both demand and lead time are variable, demand averages 200 units per day with a daily standard deviation of 25, and lead time averages 5 days with a standard deviation of 2 days. How much safety stock is required for a 90% service level?

Walsh Construction is considering two options for its supplier portfolio. Option 1 uses two local suppliers. Each has a "unique-event" risk of 8%, and the probability of a "super-event" that would disable both at the same time is estimated to be 2.5%. Option 2 uses two suppliers located in different countries. Each has a "unique-event" risk of 18%, and the probability of a "super-event" that would disable both at the same time is estimated to be 1.2%. (a) What is the probability that both suppliers will be disrupted using option 1? (b) What is the probability that both suppliers will be disrupted using option 2? (c) Which option would provide the lowest risk of a total shutdown?

What is a reorder point?