Question 1

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 2

A company wants to determine its reorder point (R).Demand is variable and the company wants to build a safety stock into R.If the average daily demand is 12, the lead time is 5 days, the desired z value is 1.96, and the standard deviation of usage during lead time is 3, which of the following is the desired value of R?

Accepted Answer

A) About 6 
B) About 16 
C) About 61 
D) About 66 
E) About 79 
A) About 6 
B) About 16 
C) About 61 
D) About 66 
E) About 79

Question 3

The standard fixed-time-period model assumes that inventory is never counted but determined by EOQ measures.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is the symbol used in the textbook for the cost of placing an order in the fixed-order-quantity inventory model?

Accepted Answer

A) C 
B) TC 
C) H 
D) Q 
E) S 
A) C 
B) TC 
C) H 
D) Q 
E) S

Question 5

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 6

Using the fixed-time-period inventory model, and given an average daily demand of 15 units, 3 days between inventory reviews, 1 day for lead time, 30 units of inventory on hand, a service probability of 98 percent, and a standard deviation of daily demand is 3 units, which of the following is the order quantity?

Accepted Answer

A) About 30.4 
B) About 36.3 
C) About 42.3 
D) About 56.8 
E) About 59.8 
A) About 30.4 
B) About 36.3 
C) About 42.3 
D) About 56.8 
E) About 59.8

Question 7

Which of the following is an assumption of the basic fixed-order-quantity inventory model?

Accepted Answer

A) Lead times are averaged. 
B) Ordering costs are variable. 
C) Price per unit of product is constant. 
D) Back-orders are allowed. 
E) Stock-out costs are high. 
A) Lead times are averaged. 
B) Ordering costs are variable. 
C) Price per unit of product is constant. 
D) Back-orders are allowed. 
E) Stock-out costs are high.

Question 8

If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

Accepted Answer

A) 909 
B) 707 
C) 634 
D) 500 
E) 141 
A) 909 
B) 707 
C) 634 
D) 500 
E) 141

Question 9

If it takes a supplier 2 days to deliver an order once it has been placed and the daily demand for 3 days has been 120, 124, and 125, which of the following is the standard deviation of usage during lead time?

Accepted Answer

A) About 2.16 
B) About 3.06 
C) About 4.66 
D) About 5.34 
E) About 9.30 
A) About 2.16 
B) About 3.06 
C) About 4.66 
D) About 5.34 
E) About 9.30

Question 10

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.

Accepted Answer

A) True 
 B)False

Question 11

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

Accepted Answer

A) True 
 B)False

Question 12

Fixed-time-period inventory models are "time triggered."

Accepted Answer

A) True 
 B)False

Question 13

An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.

Accepted Answer

A) True 
 B)False

Question 14

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 15

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 16

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

Accepted Answer

A) True 
 B)False

Question 17

Fixed-time-period inventory models generate order quantities that vary from time period to time period, depending on the usage rate.

Accepted Answer

A) True 
 B)False

Question 18

To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R?

Accepted Answer

A) The product of average daily demand times a standard deviation of lead time 
B) A z value times the lead time in days 
C) The standard deviation of vendor lead time times the standard deviation of demand 
D) The product of lead time in days times the standard deviation of lead time 
E) The product of the standard deviation of demand variability and a z score relating to a specific service probability 
A) The product of average daily demand times a standard deviation of lead time 
B) A z value times the lead time in days 
C) The standard deviation of vendor lead time times the standard deviation of demand 
D) The product of lead time in days times the standard deviation of lead time 
E) The product of the standard deviation of demand variability and a z score relating to a specific service probability

Question 19

A company wants to determine its reorder point (R).Demand is variable and the company wants to build a safety stock into R.The company wants to have a service probability coverage of 95 percent.If average daily demand is 8, lead time is 3 days, and the standard deviation of usage during lead time is 2, which of the following is the desired value of R?

Accepted Answer

A) About 17.9 
B) About 19.7 
C) About 24.0 
D) About 27.3 
E) About 31.2 
A) About 17.9 
B) About 19.7 
C) About 24.0 
D) About 27.3 
E) About 31.2

Question 20

In a price-break model of lot sizing, the lowest cost quantity is always feasible.

Accepted Answer

A) True 
 B)False

Exam 20: Inventory Management

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

The standard fixed-time-period model assumes that inventory is never counted but determined by EOQ measures.

Which of the following is the symbol used in the textbook for the cost of placing an order in the fixed-order-quantity inventory model?

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

Which of the following is an assumption of the basic fixed-order-quantity inventory model?

If annual demand is 50,000 units, the ordering cost is $25 per order, and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order-quantity model?

If it takes a supplier 2 days to deliver an order once it has been placed and the daily demand for 3 days has been 120, 124, and 125, which of the following is the standard deviation of usage during lead time?

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.

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

Fixed-time-period inventory models are "time triggered."

An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.

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

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

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

Fixed-time-period inventory models generate order quantities that vary from time period to time period, depending on the usage rate.

To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R?

In a price-break model of lot sizing, the lowest cost quantity is always feasible.

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