Question 1

Which of the following is the prescribed remedy when the bullwhip effect is caused by order batching?

Accepted Answer

A)  share demand information 
B)  channel coordination of lot sizes 
C)  increase capacity 
D)  price stabilization 
E)  allocate orders based on past demand 
A)  share demand information 
B)  channel coordination of lot sizes 
C)  increase capacity 
D)  price stabilization 
E)  allocate orders based on past demand

Question 2

A shipment of parts valued at $95,000 needs to be shipped from Tampa, FL, to Chicago, IL. They could be shipped by rail, taking 16 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,440. The annual holding cost rate for this type of item has been estimated at 28%. What option is more economical?

Accepted Answer

Daily cost of holding the item is .28(95

Question 3

Storage represents a trivial step for most items as they travel through their respective supply chains.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is NOT REQUIRED information to obtain to conduct the factor weighting technique in supplier selection analysis?

Accepted Answer

A)  a set of supplier criteria 
B)  a weight for each supplier criterion 
C)  a score for each potential supplier on each criterion 
D)  a qualitative scale on which to rate suppliers 
E)  a numerical scale on which to rate suppliers 
A)  a set of supplier criteria 
B)  a weight for each supplier criterion 
C)  a score for each potential supplier on each criterion 
D)  a qualitative scale on which to rate suppliers 
E)  a numerical scale on which to rate suppliers

Question 5

The Rushton Trash Company stocks, among many other products, a certain container, each of which occupies four square feet of warehouse space. The warehouse space currently available for storing this product is limited to 600 square feet. Demand for the product is 15,000 units per year. Holding costs are $4 per container per year. Ordering costs are $5 per order.
(a) What is the cost-minimizing order quantity decision for Rushton?
(b) What is the total inventory-related cost of this decision?
(c) What is the total inventory-related cost of managing the inventory of this product, when the limited amount of warehouse space is taken into account?
(d) What would the firm be willing to pay for additional warehouse space?

Accepted Answer

(a) The EOQ is about 194, more than ther

Question 6

Which of the following is TRUE regarding the fixed-quantity ordering system?

Accepted Answer

A)  Inventory is ordered at the end of a given period. 
B)  There is a prespecified target level T. 
C)  The same fixed amount is added to inventory every time an order for an item is placed. 
D)  There is no physical count of inventory items after an item is withdrawn. 
E)  It is suitable when vendors make routine visits to customers to take fresh orders. 
A)  Inventory is ordered at the end of a given period. 
B)  There is a prespecified target level T. 
C)  The same fixed amount is added to inventory every time an order for an item is placed. 
D)  There is no physical count of inventory items after an item is withdrawn. 
E)  It is suitable when vendors make routine visits to customers to take fresh orders.

Question 7

Identify several forms of quantity discounts other than the standard all-units quantity discount.

Accepted Answer

incremental quantity discounts

Question 8

Identify the typical cost components that constitute ordering costs in inventory systems.

Accepted Answer

Typical components of ordering

Question 9

________ is the time between placement and receipt of an order.

Accepted Answer

The answer of ________ is the time between placement and...

Question 10

In manufacturing environments, setup cost is highly correlated with ________.

Accepted Answer

The answer of In manufacturing environments, setup cost is highly...

Question 11

All EXCEPT which of the following statements about ABC analysis are TRUE?

Accepted Answer

A)  In ABC analysis, inventory may be categorized by measures other than dollar volume. 
B)  ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. 
C)  ABC analysis is an application of the Pareto principle. 
D)  ABC analysis suggests that all items require the same high degree of control. 
E)  ABC analysis suggests that there are the critical few and the trivial many inventory items. 
A)  In ABC analysis, inventory may be categorized by measures other than dollar volume. 
B)  ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. 
C)  ABC analysis is an application of the Pareto principle. 
D)  ABC analysis suggests that all items require the same high degree of control. 
E)  ABC analysis suggests that there are the critical few and the trivial many inventory items.

Question 12

The fixed-period inventory model can have a stockout during the review period as well as during the lead time, which is why fixed-period systems require more safety stock than fixed-quantity systems.

Accepted Answer

A) True 
 B)False

Question 13

Work-in-process inventory is devoted to maintenance, repair, and operating materials.

Accepted Answer

A) True 
 B)False

Question 14

When demand is constant and lead time is variable, the safety stock computation requires three inputs: the value of Z, ________, and the standard deviation of lead time.

Accepted Answer

The answer of When demand is constant and lead time...

Question 15

In the disaster risk model, as the probability of a super-event (S) increases, the advantage of utilizing multiple suppliers decreases.

Accepted Answer

A) True 
 B)False

Question 16

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order:

Accepted Answer

A)  all 4000 units at one time. 
B)  200 units per order. 
C)  every 20 days. 
D)  10 times per year. 
E)  none of these 
A)  all 4000 units at one time. 
B)  200 units per order. 
C)  every 20 days. 
D)  10 times per year. 
E)  none of these

Question 17

Which of the following is a function of inventory?

Accepted Answer

A)  to decouple various parts of the production process 
B)  to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand 
C)  to take advantage of quantity discounts 
D)  to hedge against inflation 
E)  All of these are functions of inventory. 
A)  to decouple various parts of the production process 
B)  to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand 
C)  to take advantage of quantity discounts 
D)  to hedge against inflation 
E)  All of these are functions of inventory.

Question 18

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 product do you suggest the firm keep the tightest control?

Accepted Answer

A)  R11 
B)  S22 
C)  T33 
D)  U44 
E)  V55 
A)  R11 
B)  S22 
C)  T33 
D)  U44 
E)  V55

Question 19

Define service level.

Accepted Answer

The service level is the proba

Question 20

Consider a local club selling Christmas trees. If demand is normal with a mean of 200 and a standard deviation of 50, how many trees should the club stock if service level must be greater than 95%?

Accepted Answer

The Z-value for a 95

Exam 11: Inventory Management

Which of the following is the prescribed remedy when the bullwhip effect is caused by order batching?

Storage represents a trivial step for most items as they travel through their respective supply chains.

Which of the following is NOT REQUIRED information to obtain to conduct the factor weighting technique in supplier selection analysis?

Which of the following is TRUE regarding the fixed-quantity ordering system?

Identify several forms of quantity discounts other than the standard all-units quantity discount.

Identify the typical cost components that constitute ordering costs in inventory systems.

________ is the time between placement and receipt of an order.

In manufacturing environments, setup cost is highly correlated with ________.

All EXCEPT which of the following statements about ABC analysis are TRUE?

The fixed-period inventory model can have a stockout during the review period as well as during the lead time, which is why fixed-period systems require more safety stock than fixed-quantity systems.

Work-in-process inventory is devoted to maintenance, repair, and operating materials.

When demand is constant and lead time is variable, the safety stock computation requires three inputs: the value of Z, ________, and the standard deviation of lead time.

In the disaster risk model, as the probability of a super-event (S) increases, the advantage of utilizing multiple suppliers decreases.

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order:

Which of the following is a function of inventory?

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 product do you suggest the firm keep the tightest control?

Define service level.

Consider a local club selling Christmas trees. If demand is normal with a mean of 200 and a standard deviation of 50, how many trees should the club stock if service level must be greater than 95%?

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