Exam 12: Inventory Management

Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed.

Which of the following is not true for the economic production quantity model?

The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory.

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. What is the economic order quantity for pepperoni?

The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.

The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.

Which of the following interactions with vendors would potentially lead to inventory reductions?

The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the maximum inventory would be approximately

Which one of the following is not generally a determinant of the reorder point?

The two basic issues in inventory are how much to order and when to order.

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

Annual ordering cost is inversely related to order size.

Average demand for a particular item is 1,200 units per year. It costs $100 to place an order for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed-order-interval model is chosen in this instance, how often (on average)will this item be ordered?