Question 1

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed.

Accepted Answer

A) True 
 B)False

Question 2

A company has recorded the last six days of daily demand on a single product it sells.Those values are 37, 115, 93, 112, 73, and 110.The time from when an order is placed to when it arrives at the company from its vendor is 3 days.Assuming the basic fixed-order-quantity inventory model fits this situation and no safety stock is needed, which of the following is the reorder point (R)?

Accepted Answer

A) 540 
B) 270 
C) 115 
D) 90 
E) 60 
A) 540 
B) 270 
C) 115 
D) 90 
E) 60

Question 3

The key difference between a fixed-order-quantity inventory model where demand is known and one where demand is uncertain is in computing the reorder point.

Accepted Answer

A) True 
 B)False

Question 4

The fixed-time-period inventory system has a smaller average inventory than the fixed-order-quantity system because it must also protect against stock outs during the review period when inventory is checked.

Accepted Answer

A) True 
 B)False

Question 5

Using the probability approach to determine an inventory safety stock and wanting to be 95 percent sure of covering inventory demand, which of the following is the number of standard deviations necessary to have the 95 percent service probability assured?

Accepted Answer

A) 1.28 
B) 1.64 
C) 1.96 
D) 2.00 
E) 2.18 
A) 1.28 
B) 1.64 
C) 1.96 
D) 2.00 
E) 2.18

Question 6

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 100 units and a lead time of 5 days? __________________________________.

Accepted Answer

500
Explanation: Equation 20.4

Question 7

The Pareto principle is best applied to which of the following inventory systems?

Accepted Answer

A) EOQ 
B) Fixed-time-period 
C) ABC classification 
D) Fixed-order quantity 
E) Single-period ordering system 
A) EOQ 
B) Fixed-time-period 
C) ABC classification 
D) Fixed-order quantity 
E) Single-period ordering system

Question 8

If it takes a supplier 10 days to deliver an order once it has been placed and the standard deviation of daily demand is 14, what is the standard deviation of usage during lead time? _________________________________________.

Accepted Answer

The answer of If it takes a supplier 10 days...

Question 9

Which of the following is a fixed-order-quantity inventory model?

Accepted Answer

A) Economic order quantity model 
B) The ABC model 
C) Periodic replenishment model 
D) Cycle counting model 
E) P model 
A) Economic order quantity model 
B) The ABC model 
C) Periodic replenishment model 
D) Cycle counting model 
E) P model

Question 10

Using the fixed-time-period inventory model, and given an average daily demand of 300 units, 4 days between inventory reviews, 5 days for lead time, 1,200 units of inventory on hand, a z of 1.96, and a standard deviation of demand over the review and lead time of 12 units, what quantity should be ordered? ________________________.

Accepted Answer

The answer of Using the fixed-time-period inventory model, and given...

Question 11

The fixed-order-quantity inventory model favors less expensive items because average inventory is lower.

Accepted Answer

A) True 
 B)False

Question 12

Using the fixed-time-period inventory model, and given an average daily demand of 75 units, 10 days between inventory reviews, 2 days for lead time, 50 units of inventory on hand, a service probability of 95 percent, and a standard deviation of demand over the review and lead time of 8 units, which of the following is the order quantity?

Accepted Answer

A) 863 
B) 948 
C) 1,044 
D) 1,178 
E) 4,510 
A) 863 
B) 948 
C) 1,044 
D) 1,178 
E) 4,510

Question 13

Which of the following are the recommended percentage groupings of the ABC classifications of the dollar volume of products?

Accepted Answer

A) A items get 15 percent, B items get 35 percent, and C items get 50 percent. 
B) A items get 15 percent, B items get 45 percent, and C items get 40 percent. 
C) A items get 25 percent, B items get 35 percent, and C items get 40 percent. 
D) A items get 25 percent, B items get 15 percent, and C items get 60 percent. 
E) A items get 20 percent, B items get 30 percent, and C items get 50 percent. 
A) A items get 15 percent, B items get 35 percent, and C items get 50 percent. 
B) A items get 15 percent, B items get 45 percent, and C items get 40 percent. 
C) A items get 25 percent, B items get 35 percent, and C items get 40 percent. 
D) A items get 25 percent, B items get 15 percent, and C items get 60 percent. 
E) A items get 20 percent, B items get 30 percent, and C items get 50 percent.

Question 14

Which of the following is usually included as an inventory holding cost?

Accepted Answer

A) Order placing 
B) Breakage 
C) Typing up an order 
D) Quantity discounts 
E) Annualized cost of materials 
A) Order placing 
B) Breakage 
C) Typing up an order 
D) Quantity discounts 
E) Annualized cost of materials

Question 15

Computer inventory systems are often programmed to produce a cycle count notice in which of the following case?

Accepted Answer

A) When the record shows a near maximum balance on hand 
B) When the record shows positive balance but a backorder was written 
C) When quality problems have been discovered with the item 
D) When the item has become obsolete 
E) When the item has been misplaced in the stockroom 
A) When the record shows a near maximum balance on hand 
B) When the record shows positive balance but a backorder was written 
C) When quality problems have been discovered with the item 
D) When the item has become obsolete 
E) When the item has been misplaced in the stockroom

Question 16

Fixed-order-quantity inventory models are "event triggered."

Accepted Answer

A) True 
 B)False

Question 17

The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting backordered inventory.

Accepted Answer

A) True 
 B)False

Question 18

In inventory models, high holding costs tend to favor high inventory levels.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a perpetual system for inventory management?

Accepted Answer

A) Fixed-time period 
B) Fixed-order quantity 
C) P model 
D) First-in-first-out 
E) The wheel of inventory 
A) Fixed-time period 
B) Fixed-order quantity 
C) P model 
D) First-in-first-out 
E) The wheel of inventory

Question 20

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

Accepted Answer

A) True 
 B)False

Exam 20: Inventory Management

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed.

The key difference between a fixed-order-quantity inventory model where demand is known and one where demand is uncertain is in computing the reorder point.

The fixed-time-period inventory system has a smaller average inventory than the fixed-order-quantity system because it must also protect against stock outs during the review period when inventory is checked.

Using the probability approach to determine an inventory safety stock and wanting to be 95 percent sure of covering inventory demand, which of the following is the number of standard deviations necessary to have the 95 percent service probability assured?

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 100 units and a lead time of 5 days? __________________________________.

The Pareto principle is best applied to which of the following inventory systems?

If it takes a supplier 10 days to deliver an order once it has been placed and the standard deviation of daily demand is 14, what is the standard deviation of usage during lead time? _________________________________________.

Which of the following is a fixed-order-quantity inventory model?

The fixed-order-quantity inventory model favors less expensive items because average inventory is lower.

Which of the following are the recommended percentage groupings of the ABC classifications of the dollar volume of products?

Which of the following is usually included as an inventory holding cost?

Computer inventory systems are often programmed to produce a cycle count notice in which of the following case?

Fixed-order-quantity inventory models are "event triggered."

The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting backordered inventory.

In inventory models, high holding costs tend to favor high inventory levels.

Which of the following is a perpetual system for inventory management?

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

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