Question 1

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

Accepted Answer

A) True 
 B)False  True

Question 2

If demand for an item is normally distributed, we plan for demand to be twice the average demand and carry 2 standard deviations worth of safety stock inventory.

Accepted Answer

A) True 
 B)False  False

Question 3

Using the fixed-order-quantity model, what is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $40, and a holding cost per unit per year of $45? ______________________________________________.

Accepted Answer

$5,692

Question 4

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

Accepted Answer

A) True 
 B)False

Question 5

Safety stock is not necessary in any fixed-time-period system.

Accepted Answer

A) True 
 B)False

Question 6

One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is a fixed-time-period inventory model?

Accepted Answer

A) The EOQ model 
B) The least cost method 
C) The Q model 
D) Periodic system model 
E) Just-in-time model 
A) The EOQ model 
B) The least cost method 
C) The Q model 
D) Periodic system model 
E) Just-in-time model

Question 8

Which of the following is the set of all cost components that make up the fixed-order-quantity total annual cost (TC) function?

Accepted Answer

A) Annual purchasing cost, annual ordering cost, fixed cost 
B) Annual holding cost, annual ordering cost, unit cost 
C) Annual holding cost, annual ordering cost, annual purchasing cost 
D) Annual lead time cost, annual holding cost, annual purchasing cost 
E) Annual unit cost, annual set up cost, annual purchasing cost 
A) Annual purchasing cost, annual ordering cost, fixed cost 
B) Annual holding cost, annual ordering cost, unit cost 
C) Annual holding cost, annual ordering cost, annual purchasing cost 
D) Annual lead time cost, annual holding cost, annual purchasing cost 
E) Annual unit cost, annual set up cost, annual purchasing cost

Question 9

If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Accepted Answer

A) 5,060 
B) 2,320 
C) 2,133 
D) 2,004 
E) 1,866 
A) 5,060 
B) 2,320 
C) 2,133 
D) 2,004 
E) 1,866

Question 10

What are the five purposes of inventory?
(1) _______________________________
(2) _______________________________
(3) _______________________________
(4) _______________________________
(5) _______________________________.

Accepted Answer

(1 to maintain independence of operation

Question 11

In the fixed-time-period model it is necessary to determine the inventory currently on hand to calculate the size of the order to place with a vendor.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is not included as an inventory holding cost?

Accepted Answer

A) Annualized cost of materials 
B) Handling 
C) Insurance 
D) Pilferage 
E) Storage facilities 
A) Annualized cost of materials 
B) Handling 
C) Insurance 
D) Pilferage 
E) Storage facilities

Question 13

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days?

Accepted Answer

A) 421 
B) 234 
C) 78 
D) 26 
E) 312 
A) 421 
B) 234 
C) 78 
D) 26 
E) 312

Question 14

When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

Accepted Answer

A) True 
 B)False

Question 15

One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation.

Accepted Answer

A) True 
 B)False

Question 16

The costs associated with reduced inventory results in lower profits.

Accepted Answer

A) True 
 B)False

Question 17

Using the probability approach, we assume that the demand over a period of time is normally distributed.

Accepted Answer

A) True 
 B)False

Question 18

The fixed-order-quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and, therefore, quicker response to a potential stock out.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a reason to carry inventory?

Accepted Answer

A) To provide a safeguard for variation in raw material delivery time 
B) To take advantage of economic purchase-order size 
C) To maintain independence of operations 
D) To meet variation in product demand 
E) To keep the stock out of the hands of competitors 
A) To provide a safeguard for variation in raw material delivery time 
B) To take advantage of economic purchase-order size 
C) To maintain independence of operations 
D) To meet variation in product demand 
E) To keep the stock out of the hands of competitors

Question 20

In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order-quantity inventory model, which of the following must be computed first?

Accepted Answer

A) Standard deviation of daily demand 
B) Number of standard deviations for a specific service probability 
C) Stock-out cost 
D) Economic order quantity 
E) Safety stock level 
A) Standard deviation of daily demand 
B) Number of standard deviations for a specific service probability 
C) Stock-out cost 
D) Economic order quantity 
E) Safety stock level

Exam 20: Inventory Management

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

If demand for an item is normally distributed, we plan for demand to be twice the average demand and carry 2 standard deviations worth of safety stock inventory.

Using the fixed-order-quantity model, what is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $40, and a holding cost per unit per year of $45? ______________________________________________.

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

Safety stock is not necessary in any fixed-time-period system.

One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing.

Which of the following is a fixed-time-period inventory model?

Which of the following is the set of all cost components that make up the fixed-order-quantity total annual cost (TC) function?

If annual demand is 35,000 units, the ordering cost is $50 per order, and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

What are the five purposes of inventory? (1) _______________________________ (2) _______________________________ (3) _______________________________ (4) _______________________________ (5) _______________________________.

In the fixed-time-period model it is necessary to determine the inventory currently on hand to calculate the size of the order to place with a vendor.

Which of the following is not included as an inventory holding cost?

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days?

When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation.

The costs associated with reduced inventory results in lower profits.

Using the probability approach, we assume that the demand over a period of time is normally distributed.

The fixed-order-quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and, therefore, quicker response to a potential stock out.

Which of the following is not a reason to carry inventory?

In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order-quantity inventory model, which of the following must be computed first?

Introduction

Strategy

Design of Products and Services

Project Management

Strategic Capacity Management

Learning Curves

Manufacturing Processes

Facility Layout

Service Processes

Waiting Line Analysis and Simulation

Process Design and Analysis

Six Sigma Quality

Statistical Quality Control

Lean Supply Chains

Logistics Distribution, and Transportation

Global Sourcing and Procurement

Enterprise Resource Planning Systems

Forecasting

Sales and Operations Planning

Material Requirements Planning

Workcenter Scheduling

Theory of Constraints

Health Care

Operations Consulting

Filters

What are the five purposes of inventory? (1) _______________ (2) _ (3) _ (4) _ (5) _________________.