Question 1

A specific product has demand during lead time of 100 units, with a standard deviation of 25 units. What safety stock (approximately) provides a 95% service level?

Accepted Answer

A)  41 
B)  55 
C)  133 
D)  140 
E)  165 
A)  41 
B)  55 
C)  133 
D)  140 
E)  165

Question 2

When quantity discounts are allowed, the cost-minimizing order quantity

Accepted Answer

A)  is always an EOQ quantity 
B)  minimizes the sum of holding and ordering costs 
C)  minimizes the unit purchase price 
D)  may be a quantity below that at which one qualifies for that price 
E)  minimizes the sum of holding, ordering, and product costs 
A)  is always an EOQ quantity 
B)  minimizes the sum of holding and ordering costs 
C)  minimizes the unit purchase price 
D)  may be a quantity below that at which one qualifies for that price 
E)  minimizes the sum of holding, ordering, and product costs

Question 3

Units of safety stock are additions to the reorder point that allow for variability in the rate of demand, the length of lead time, or both.

Accepted Answer

A) True 
 B)False

Question 4

The primary purpose of the basic economic order quantity model shown below is Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Accepted Answer

A)  to calculate the reorder point, so that replenishments take place at the proper time 
B)  to minimize the sum of carrying cost and holding cost 
C)  to maximize the customer service level 
D)  to minimize the sum of setup cost and holding cost 
E)  to calculate the optimum safety stock 
A)  to calculate the reorder point, so that replenishments take place at the proper time 
B)  to minimize the sum of carrying cost and holding cost 
C)  to maximize the customer service level 
D)  to minimize the sum of setup cost and holding cost 
E)  to calculate the optimum safety stock

Question 5

What happens to the cost of the inventory policy when the service level increases?

Accepted Answer

The cost of the inve

Question 6

If demand is not uniform and constant, then stockout risks can be controlled by

Accepted Answer

A)  increasing the EOQ 
B)  placing an extra order 
C)  raising the selling price to reduce demand 
D)  adding safety stock 
E)  reducing the reorder point 
A)  increasing the EOQ 
B)  placing an extra order 
C)  raising the selling price to reduce demand 
D)  adding safety stock 
E)  reducing the reorder point

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately

Accepted Answer

A)  24 
B)  100 
C)  141 
D)  490 
E)  600 
A)  24 
B)  100 
C)  141 
D)  490 
E)  600

Question 9

Perform an ABC analysis on the following set of products.
 $$\begin{array} { | c | c | c | } 
\hline \text { Item } & \begin{array} { c } 
\text { Annual } \
\text { Demand }
\end{array} & \text { Unit Cost } \
\hline \text { A211 } & 1200 & \$ 9 \
\hline \text { B390 } & 100 & \$ 90 \
\hline \text { C003 } & 4500 & \$ 6 \
\hline \text { D100 } & 400 & \$ 150 \
\hline \text { E707 } & 35 & \$ 2000 \
\hline \text { F660 } & 250 & \$ 120 \
\hline \text { G473 } & 1000 & \$ 90 \
\hline \text { H921 } & 100 & \$ 75 \
\hline
\end{array}$$

Accepted Answer

The table below details the contribution

Question 10

Q is to __________ systems as P is to __________ systems.

Accepted Answer

A)  fixed quantity, fixed period 
B)  variable demand, constant demand 
C)  variable lead time, variable demand 
D)  variable quantity, variable period 
E)  None of the above is accurate 
A)  fixed quantity, fixed period 
B)  variable demand, constant demand 
C)  variable lead time, variable demand 
D)  variable quantity, variable period 
E)  None of the above is accurate

Question 11

A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

Accepted Answer

A)  16 
B)  70 
C)  110 
D)  183 
E)  600 
A)  16 
B)  70 
C)  110 
D)  183 
E)  600

Question 12

Which of the following items is mostly likely managed using a single-period order model?

Accepted Answer

A)  Christmas trees 
B)  canned food at the grocery store 
C)  automobiles at a dealership 
D)  metal for a manufacturing process 
E)  gas sold to a gas station 
A)  Christmas trees 
B)  canned food at the grocery store 
C)  automobiles at a dealership 
D)  metal for a manufacturing process 
E)  gas sold to a gas station

Question 13

Thomas' Bike Shop stocks a high volume item that has a normally distributed demand during the reorder period. The average daily demand is 70 units, the lead time is 4 days, and the standard deviation of demand during the reorder period is 15.
a. How much safety stock provides a 95% service level to Thomas?
b. What should the reorder point be?

Accepted Answer

a. SS = 1.65 x 15 =

Question 14

Average daily demand for a product is normally distributed with a mean of 20 units and a standard deviation of 3 units. Lead time is fixed at 25 days. What reorder point provides for a service level of 95 percent?

Accepted Answer

ROP = D ∙ L + z ∙ σd

Question 15

Inventory that separates various parts of the production process performs a __________ function.

Accepted Answer

The answer of Inventory that separates various parts of the...

Question 16

Among the advantages of cycle counting is that it

Accepted Answer

A)  makes the annual physical inventory more acceptable to management 
B)  does not require the detailed records necessary when annual physical inventory is used 
C)  does not require highly trained people 
D)  allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory 
E)  does not need to be performed for less expensive items 
A)  makes the annual physical inventory more acceptable to management 
B)  does not require the detailed records necessary when annual physical inventory is used 
C)  does not require highly trained people 
D)  allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory 
E)  does not need to be performed for less expensive items

Question 17

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

Accepted Answer

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

Question 18

The fixed-period inventory model requires more safety stock than the fixed-quantity models because

Accepted Answer

A)  a stockout can occur during the review period as well as during the lead time 
B)  this model is used for products that have large standard deviations of demand 
C)  this model is used for products that require very high service levels 
D)  replenishment is not instantaneous 
E)  setup costs and holding costs are large 
A)  a stockout can occur during the review period as well as during the lead time 
B)  this model is used for products that have large standard deviations of demand 
C)  this model is used for products that require very high service levels 
D)  replenishment is not instantaneous 
E)  setup costs and holding costs are large

Question 19

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

Accepted Answer

A) True 
 B)False

Question 20

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will

Accepted Answer

A)  increase by about 41% 
B)  increase by 100% 
C)  increase by 200% 
D)  increase, but more data is needed to say by how much 
E)  either increase or decrease 
A)  increase by about 41% 
B)  increase by 100% 
C)  increase by 200% 
D)  increase, but more data is needed to say by how much 
E)  either increase or decrease

Exam 15: Inventory Management

A specific product has demand during lead time of 100 units, with a standard deviation of 25 units. What safety stock (approximately) provides a 95% service level?

When quantity discounts are allowed, the cost-minimizing order quantity

Units of safety stock are additions to the reorder point that allow for variability in the rate of demand, the length of lead time, or both.

The primary purpose of the basic economic order quantity model shown below is Q* = 2⋅D⋅SH\sqrt { \frac { 2 \cdot D \cdot S } { H } }H2⋅D⋅S​​

What happens to the cost of the inventory policy when the service level increases?

If demand is not uniform and constant, then stockout risks can be controlled by

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

In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately

Perform an ABC analysis on the following set of products. Item Annual Demand Unit Cost A211 1200 \ 9 B390 100 \ 90 C003 4500 \ 6 D100 400 \ 150 E707 35 \ 2000 F660 250 \ 120 G473 1000 \ 90 H921 100 \ 75

Q is to __________ systems as P is to __________ systems.

A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

Which of the following items is mostly likely managed using a single-period order model?

Average daily demand for a product is normally distributed with a mean of 20 units and a standard deviation of 3 units. Lead time is fixed at 25 days. What reorder point provides for a service level of 95 percent?

Inventory that separates various parts of the production process performs a __________ function.

Among the advantages of cycle counting is that it

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

The fixed-period inventory model requires more safety stock than the fixed-quantity models because

Insurance and taxes on inventory are part of the costs known as setup or ordering costs.

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will

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The primary purpose of the basic economic order quantity model shown below is Q* = $\sqrt { \frac { 2 \cdot D \cdot S } { H } }$

Q is to systems as P is to systems.