Exam 17: Inventory Control

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.

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.

A two-bin inventory system actually requires four physical bins to work.

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to specify when items should be ordered.

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

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

In making any decision that affects the size of inventory,what are the four categories of cost that must be considered?

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

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 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.

Shortage costs are precise and easy to measure.

The "sawtooth effect",named after turn-around artist Al "chainsaw" Dunlap is the severe reduction of inventory and service Levels that occurs when a firm has gone through a hostile takeover.

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine how large the orders to vendors should be.

Explain the difference between inventory control for finished goods in manufacturing and in services?

If a vendor has correctly used marginal analysis to select their stock Levels for the day (as in the newsperson problem)and the profit resulting from the last unit being sold (MP)is $0.90 and the loss resulting from that unit if it is not sold (ML)is $0.50,which of the following is the probability of the last unit being sold?

If annual demand is 12,000 units,the ordering cost is $6 per order and the holding cost is $2.50 per unit per year,which of the following is the optimal order quantity using the fixed-order quantity model?

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

If the cost to change from one product to another were zero the lot size would be very small.

In a two-bin system for inventory,items are used from one bin and the second bin provides a large enough amount to ensure that the stock can be replenished before running out.

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