Question 1

The main trait of a single-period model is that

Accepted Answer

A)  inventory has limited value after a certain period of time 
B)  it has the largest EOQ sizes 
C)  the order quantity should usually equal the expected value of demand 
D)  supply is limited 
E)  all of the above 
A)  inventory has limited value after a certain period of time 
B)  it has the largest EOQ sizes 
C)  the order quantity should usually equal the expected value of demand 
D)  supply is limited 
E)  all of the above

Question 2

The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during the reorder period is 170 trimmers, and the standard deviation is 60 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 99%. Is it worthwhile for Winfield to make this change?

Accepted Answer

This is solved with a cost comparison: t

Question 3

Define shrinkage. List three or more examples of shrinkage.

Accepted Answer

Shrinkage is retail inventory that is un

Question 4

Which of the following statements about the basic EOQ model is true?

Accepted Answer

A)  If the ordering cost were to double, the EOQ would rise. 
B)  If annual demand were to double, the EOQ would increase. 
C)  If the carrying cost were to increase, the EOQ would fall. 
D)  If annual demand were to double, the number of orders per year would increase. 
E)  All of the above statements are true. 
A)  If the ordering cost were to double, the EOQ would rise. 
B)  If annual demand were to double, the EOQ would increase. 
C)  If the carrying cost were to increase, the EOQ would fall. 
D)  If annual demand were to double, the number of orders per year would increase. 
E)  All of the above statements are true.

Question 5

When is a good time for cycle-counting personnel to audit a particular item?

Accepted Answer

In deciding when to verify inventory thr

Question 6

__________ inventory is material that is usually purchased, but has yet to enter the manufacturing process.

Accepted Answer

The answer of __________ inventory is material that is usually...

Question 7

Demand for ice cream at the Ouachita Dairy can be approximated by a normal distribution with a mean of 47 gallons per day and a standard deviation of 8 gallons per day. The new management desires a service level of 95%. Lead time is four days; the dairy is open seven days a week. What reorder point would be consistent with the desired service level?

Accepted Answer

SS = 1.65 ∙ 8 ∙ @#IMG-DLM& = 2

Question 8

In a quantity discount problem, if the savings in product cost is smaller than the increase in the sum of setup cost and holding cost, the discount should be __________.

Accepted Answer

The answer of In a quantity discount problem, if the...

Question 9

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

Accepted Answer

A)  three times as large 
B)  one-third as large 
C)  nine times as large 
D)  one-ninth as large 
E)  cannot be determined 
A)  three times as large 
B)  one-third as large 
C)  nine times as large 
D)  one-ninth as large 
E)  cannot be determined

Question 10

The two most basic inventory questions answered by the typical inventory model are

Accepted Answer

A)  timing and cost of orders 
B)  quantity and cost of orders 
C)  timing and quantity of orders 
D)  order quantity and service level 
E)  ordering cost and carrying cost 
A)  timing and cost of orders 
B)  quantity and cost of orders 
C)  timing and quantity of orders 
D)  order quantity and service level 
E)  ordering cost and carrying cost

Question 11

If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock?

Accepted Answer

A)  8 units 
B)  10 units 
C)  16 units 
D)  64 units 
E)  Cannot be determined without lead time data. 
A)  8 units 
B)  10 units 
C)  16 units 
D)  64 units 
E)  Cannot be determined without lead time data.

Question 12

If setup costs are reduced by substantial reductions in setup time, the production order quantity is also reduced.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements regarding control of service inventories is true?

Accepted Answer

A)  Service inventory is a fictional concept, because services are intangible. 
B)  Service inventory needs no safety stock, because there's no such thing as a service stockout. 
C)  Effective control of all goods leaving the facility is one applicable technique. 
D)  Service inventory has carrying costs but no setup costs. 
E)  Good personnel selection, training, and discipline are easy. 
A)  Service inventory is a fictional concept, because services are intangible. 
B)  Service inventory needs no safety stock, because there's no such thing as a service stockout. 
C)  Effective control of all goods leaving the facility is one applicable technique. 
D)  Service inventory has carrying costs but no setup costs. 
E)  Good personnel selection, training, and discipline are easy.

Question 14

The difference between P and Q inventory systems is

Accepted Answer

A)  order size 
B)  order spacing 
C)  maximum service level 
D)  A and B 
E)  all of the above 
A)  order size 
B)  order spacing 
C)  maximum service level 
D)  A and B 
E)  all of the above

Question 15

Explain what "decoupling" means in the context of inventory management.

Accepted Answer

Decoupling means to separate v

Question 16

Huckaby Motor Services, Inc. rebuilds small electrical items such as motors, alternators, and transformers, all using a certain type of copper wire. The firm's demand for this wire is approximately normal, averaging 20 spools per week, with a standard deviation of 6 spools per week. Cost per spool is $24; ordering costs are $25 per order; inventory handling cost is $4.00 per spool per year. Acquisition lead time is four weeks. The company works 50, 5-day weeks per year.
a. What is the optimal size of an order, if minimization of inventory system cost is the objective?
b. What are the safety stock and reorder point if the desired service level is 90%?

Accepted Answer

Demand is

Question 17

An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true?

Accepted Answer

A)  One hundred is the reorder point, and 14 is the order quantity. 
B)  Fourteen is the reorder point, and 100 is the order quantity. 
C)  The number 100 is a function of demand during lead time. 
D)  Fourteen is the safety stock, and 100 is the reorder point. 
E)  None of the above is true. 
A)  One hundred is the reorder point, and 14 is the order quantity. 
B)  Fourteen is the reorder point, and 100 is the order quantity. 
C)  The number 100 is a function of demand during lead time. 
D)  Fourteen is the safety stock, and 100 is the reorder point. 
E)  None of the above is true.

Question 18

All of the following statements about ABC analysis are true except

Accepted Answer

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

Question 19

A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard deviation of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level?

Accepted Answer

A)  .60 
B)  .20 
C)  .84 
D)  .40 
E)  unable to determine given the above information 
A)  .60 
B)  .20 
C)  .84 
D)  .40 
E)  unable to determine given the above information

Question 20

In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. The standard deviation of demand during lead time is approximately

Accepted Answer

A)  15 units 
B)  100 units 
C)  154 units 
D)  500 units 
E)  13,125 units 
A)  15 units 
B)  100 units 
C)  154 units 
D)  500 units 
E)  13,125 units

Exam 15: Inventory Management

The main trait of a single-period model is that

Define shrinkage. List three or more examples of shrinkage.

Which of the following statements about the basic EOQ model is true?

When is a good time for cycle-counting personnel to audit a particular item?

__________ inventory is material that is usually purchased, but has yet to enter the manufacturing process.

In a quantity discount problem, if the savings in product cost is smaller than the increase in the sum of setup cost and holding cost, the discount should be __________.

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is

The two most basic inventory questions answered by the typical inventory model are

If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock?

If setup costs are reduced by substantial reductions in setup time, the production order quantity is also reduced.

Which of the following statements regarding control of service inventories is true?

The difference between P and Q inventory systems is

Explain what "decoupling" means in the context of inventory management.

An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true?

All of the following statements about ABC analysis are true except

A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard deviation of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level?

In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. The standard deviation of demand during lead time is approximately

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