Question 1

List the four types of inventory.

Accepted Answer

The four types of inventory ar

Question 2

Which of the following should be higher in P systems than Q?

Accepted Answer

A)  lead time 
B)  demand 
C)  order size 
D)  order spacing 
E)  safety Stock 
A)  lead time 
B)  demand 
C)  order size 
D)  order spacing 
E)  safety Stock

Question 3

The purpose of safety stock is to

Accepted Answer

A)  replace failed units with good ones 
B)  eliminate the possibility of a stockout 
C)  eliminate the likelihood of a stockout due to erroneous inventory tally 
D)  control the likelihood of a stockout due to the variability of demand during lead time 
E)  protect the firm from a sudden decrease in demand 
A)  replace failed units with good ones 
B)  eliminate the possibility of a stockout 
C)  eliminate the likelihood of a stockout due to erroneous inventory tally 
D)  control the likelihood of a stockout due to the variability of demand during lead time 
E)  protect the firm from a sudden decrease in demand

Question 4

In the basic economic order quantity model and in the production order quantity model, optimal behavior occurs where annual setup costs equal annual holding costs. Is this a coincidence, or a fundamental element of these models?
 Answer in a well-constructed paragraph.

Accepted Answer

This equality is not a coincidence. It f

Question 5

Cycle counting

Accepted Answer

A)  is a process by which inventory records are verified once a year 
B)  provides a measure of inventory accuracy 
C)  provides a measure of inventory turnover 
D)  assumes that all inventory records must be verified with the same frequency 
E)  assumes that the most frequently used items must be counted more frequently 
A)  is a process by which inventory records are verified once a year 
B)  provides a measure of inventory accuracy 
C)  provides a measure of inventory turnover 
D)  assumes that all inventory records must be verified with the same frequency 
E)  assumes that the most frequently used items must be counted more frequently

Question 6

The proper quantity of safety stock is typically determined by

Accepted Answer

A)  using a single-period model 
B)  carrying sufficient safety stock so as to eliminate all stockouts 
C)  multiplying the EOQ by the desired service level 
D)  setting the level of safety stock so that a given stockout risk is not exceeded 
E)  minimizing total costs 
A)  using a single-period model 
B)  carrying sufficient safety stock so as to eliminate all stockouts 
C)  multiplying the EOQ by the desired service level 
D)  setting the level of safety stock so that a given stockout risk is not exceeded 
E)  minimizing total costs

Question 7

The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair which costs $300. The annual holding cost rate is 40%, annual demand is 900, and the order cost is $20 per order. The lead time is 4 days. Because demand is variable (standard deviation of daily demand is 2.4 chairs), PCE has decided to establish a customer service level of 90%. The store is open 300 days per year.
a. What is the optimal order quantity?
b. What is the safety stock?
c. What is the reorder point?

Accepted Answer

(a) The optimal order quantity is Q* = @#IMG-DLM&

Question 8

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

Accepted Answer

A)  about 18 
B)  about 24 
C)  about 32 
D)  about 38 
E)  more than 40 
A)  about 18 
B)  about 24 
C)  about 32 
D)  about 38 
E)  more than 40

Question 9

A production order quantity problem has daily demand rate = 10 and daily production rate = 50. The production order quantity for this problem is approximately 612 units. The average inventory for this problem is approximately

Accepted Answer

A)  61 
B)  245 
C)  300 
D)  306 
E)  490 
A)  61 
B)  245 
C)  300 
D)  306 
E)  490

Question 10

In cycle counting, the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

Accepted Answer

A) True 
 B)False

Question 11

In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this "rule" does not hold; explain how the model's results are optimal anyway.

Accepted Answer

This rule will not hold in all instances

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

What are the techniques to control service inventories?

Accepted Answer

Techniques to control service

Question 14

Montegut Manufacturing produces a product for which the annual demand is 10,000 units. Production averages 100 per day, while demand is 40 per day. Holding costs are $2.00 per unit per year; set-up costs $200.00. If they wish to produce this product in economic batches, what size batch should be used?
 What is the maximum inventory level?
 How many order cycles are there per year?
 How much does management of this good in inventory cost the firm each year?

Accepted Answer

This problem requires economic order qua

Question 15

In the quantity discount model, the cost of acquiring goods (product cost) is not a factor in determining lot size.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements regarding the reorder point is true?

Accepted Answer

A)  The reorder point is that quantity that triggers an action to restock an item. 
B)  There is a reorder point even if lead time and demand during lead time are constant. 
C)  The reorder point is larger than d x L if safety stock is present. 
D)  The fixed-period model has no reorder point. 
E)  All of the above are true. 
A)  The reorder point is that quantity that triggers an action to restock an item. 
B)  There is a reorder point even if lead time and demand during lead time are constant. 
C)  The reorder point is larger than d x L if safety stock is present. 
D)  The fixed-period model has no reorder point. 
E)  All of the above are true.

Question 17

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Accepted Answer

A)  is smaller than the holding cost per unit 
B)  is zero 
C)  is one-half of the economic order quantity 
D)  is affected by the amount of product cost 
E)  goes down if the holding cost per unit goes down 
A)  is smaller than the holding cost per unit 
B)  is zero 
C)  is one-half of the economic order quantity 
D)  is affected by the amount of product cost 
E)  goes down if the holding cost per unit goes down

Question 18

Average daily demand for a product is normally distributed with a mean of 5 units and a standard deviation of 1 unit. Lead time is fixed at four days.
a. What is the reorder point if there is no safety stock?
b. What is the reorder point if the service level is 80 percent?
c. How much more safety stock is required if the service level is raised from 80 percent to 90 percent?

Accepted Answer

This problem requires formula 12-15, sin

Question 19

An advantage of the fixed-period inventory system is that

Accepted Answer

A)  safety stock will be lower than it would be under a fixed-quantity inventory system 
B)  there is no physical count of inventory items when an item is withdrawn 
C)  no inventory records are required 
D)  orders usually are for smaller order quantities 
E)  the average inventory level is reduced 
A)  safety stock will be lower than it would be under a fixed-quantity inventory system 
B)  there is no physical count of inventory items when an item is withdrawn 
C)  no inventory records are required 
D)  orders usually are for smaller order quantities 
E)  the average inventory level is reduced

Question 20

Which of the following statements about ABC analysis is False?

Accepted Answer

A)  ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. 
B)  In ABC analysis, "A" Items are tightly controlled, have accurate records, and receive regular review by major decision makers. 
C)  In ABC analysis, "C" Items have minimal records, periodic review, and simple controls. 
D)  ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. 
E)  All of the above statements are true. 
A)  ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. 
B)  In ABC analysis, "A" Items are tightly controlled, have accurate records, and receive regular review by major decision makers. 
C)  In ABC analysis, "C" Items have minimal records, periodic review, and simple controls. 
D)  ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. 
E)  All of the above statements are true.

Exam 15: Inventory Management

List the four types of inventory.

Which of the following should be higher in P systems than Q?

The purpose of safety stock is to

In the basic economic order quantity model and in the production order quantity model, optimal behavior occurs where annual setup costs equal annual holding costs. Is this a coincidence, or a fundamental element of these models? Answer in a well-constructed paragraph.

Cycle counting

The proper quantity of safety stock is typically determined by

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

A production order quantity problem has daily demand rate = 10 and daily production rate = 50. The production order quantity for this problem is approximately 612 units. The average inventory for this problem is approximately

In cycle counting, the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this "rule" does not hold; explain how the model's results are optimal anyway.

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

What are the techniques to control service inventories?

In the quantity discount model, the cost of acquiring goods (product cost) is not a factor in determining lot size.

Which of the following statements regarding the reorder point is true?

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = 2⋅D⋅SH\sqrt { \frac { 2 \cdot D \cdot S } { H } }H2⋅D⋅S​​

An advantage of the fixed-period inventory system is that

Which of the following statements about ABC analysis is False?

Operations and Productivity

Operations Strategy in a Global Environment

Project Management

Forecasting

Design of Goods and Services

Managing Quality

Statistical Process Control

Process Strategy

Capacity and Constraint Management

Location Strategies

Layout Strategies

Human Resources, Job Design, and Work Measurement

Supply-Chain Management

Outsourcing as a Supply-Chain Strategy

Aggregate Planning

Material Requirements Planning MRP and ERP

Short-Term Scheduling

Just-In-Time and Lean Options

Maintenance and Reliability

Decision-Making Tools

Linear Programming

Transportation Models

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Learning Curves

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If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$