Exam 12: Inventory Management

The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If the order size was 1,000 kilograms of resin, what would be the average inventory level?

The manager of the Quick Stop Corner Convenience Store (which never closes)sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the length of an order cycle?

Safety stock eliminates all stockouts.

If there are shipping cost economies that result from bundling orders for different items together, the __________ model becomes a relatively more attractive option.

Discrete stocking levels are used when an organization does not want visibility of inventory levels.

In the A-B-C classification system, items which account for about 60 percent of the annual dollar value, but only about 10 to 15 percent of the items in inventory, would be classified as

An inventory buffer adds value and lowers cost in all supply chains.

If average demand for an item is 20 units per day, safety stock is 50 units, and lead time is four days, the ROP will be

In a single-period inventory situation, the probabilities that demand will be 1, 2, 3, or 4 units are 0.3, 0.3, 0.2, and 0.2, respectively. If two units are stocked, what is the probability of selling both of them?

The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills. She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, what is the economic order quantity?

In the single-period model, the service level is the probability that demand will not exceed the stocking level in any period.

Which one of the following is implied by a lead time service level of 95 percent?

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the length of an order cycle?

Which system requires a physical count of items that are in inventory made at periodic intervals?

The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. What is the economic order quantity for resin?

Solving quality problems can lead to lower inventory levels.

An operations strategy which recognizes high carrying costs and reduces ordering costs will result in

A quantity discount will lower the reorder point.

Cycle counting can be used in motorcycle inventory control.

The manager of the Quick Stop Corner Convenience Store (which never closes)sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the average inventory level?