Question 1

A service level of 95% means there is a 0.95 probability

Accepted Answer

A) of a stockout. 
B) that supply will exceed demand. 
C) that demand will be met during the lead time. 
D) None of these answer choices is correct. 
A) of a stockout. 
B) that supply will exceed demand. 
C) that demand will be met during the lead time. 
D) None of these answer choices is correct.

Question 2

Drugstores are one example of a business using a periodic inventory system because of their dependence on vendor-managed inventory.

Accepted Answer

A) True 
 B)False

Question 3

What is the discount order quantity using a purchase price of $130?

Accepted Answer

A) 100 
B) 115.47 
C) 200 
D) 500 
A) 100 
B) 115.47 
C) 200 
D) 500

Question 4

A quantity discount is a price discount available if a predetermined number of units is ordered.

Accepted Answer

A) True 
 B)False

Question 5

________________ is additional inventory kept at various stages of the production process to provide independence between stages to avoid work stoppages.

Accepted Answer

A) Safety stock 
B) Buffer stock 
C) Finished stock 
D) None of these answer choices is correct. 
A) Safety stock 
B) Buffer stock 
C) Finished stock 
D) None of these answer choices is correct.

Question 6

Inventory management is concerned with how much to order and when to order.

Accepted Answer

A) True 
 B)False

Question 7

The EOQ model determines the optimal order size that minimizes the sum of carrying costs and shortage costs.

Accepted Answer

A) True 
 B)False

Question 8

Annual demand for a product is 40,000 units.The product is used at a constant rate over the 365 days the company is open every year.The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00.If the company orders according to the economic order quantity (EOQ)formula,then its average inventory level for this product is

Accepted Answer

A) 20,000 units. 
B) 10,000 units. 
C) 2,500 units. 
D) 1,000 units. 
A) 20,000 units. 
B) 10,000 units. 
C) 2,500 units. 
D) 1,000 units.

Question 9

Annual demand for a product is 40,000 units.The product is used at a constant rate over the 365 days the company is open every year.The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00.If the company orders according to the economic order quantity (EOQ)formula then its total annual inventory cost for this product is

Accepted Answer

A) $100,000. 
B) $5,000. 
C) $2,500 
D) $50,000 
A) $100,000. 
B) $5,000. 
C) $2,500 
D) $50,000

Question 10

A company may purchase larger amounts of inventory for all the following reasons except

Accepted Answer

A) to reduce inventory carrying costs. 
B) to take advantage of quantity discounts. 
C) as a hedge against future price increases. 
D) to obtain lower prices purchasing in volume. 
A) to reduce inventory carrying costs. 
B) to take advantage of quantity discounts. 
C) as a hedge against future price increases. 
D) to obtain lower prices purchasing in volume.

Question 11

As the level of inventory increases to provide better customer service,quality-related customer service costs decrease.

Accepted Answer

A) True 
 B)False

Question 12

The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50.The lead-time for the component is 9 days.If a service level of 95% is desired then the company's reorder point for this component is approximately

Accepted Answer

A) 3,785 units. 
B) 4,500 units. 
C) 4,627units. 
D) 4,747units. 
A) 3,785 units. 
B) 4,500 units. 
C) 4,627units. 
D) 4,747units.

Question 13

A continuous inventory system is also known as a

Accepted Answer

A) fixed-time period system 
B) fixed-order quantity system 
C) fixed-lead time system 
D) fixed-amount system 
A) fixed-time period system 
B) fixed-order quantity system 
C) fixed-lead time system 
D) fixed-amount system

Question 14

A product's usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125.The product's lead time is 4 weeks.Currently,the reorder point for this product is 8,200.If the company would like to have a service level of 95% for this product then

Accepted Answer

A) it must decrease its safety stock by approximately 412 units. 
B) it must decrease its safety stock by approximately 212 units. 
C) it must increase its safety stock by approximately 412 units. 
D) it must increase its safety stock by approximately 212 units. 
A) it must decrease its safety stock by approximately 412 units. 
B) it must decrease its safety stock by approximately 212 units. 
C) it must increase its safety stock by approximately 412 units. 
D) it must increase its safety stock by approximately 212 units.

Question 15

The reorder point is the level of inventory that prompts a new order to be placed in a continuous inventory system.

Accepted Answer

A) True 
 B)False

Question 16

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity each time an order is placed,then ______orders are placed during the year.

Accepted Answer

A) 13 
B) 15 
C) 20 
D) 25 
A) 13 
B) 15 
C) 20 
D) 25

Question 17

The average inventory can be calculated by dividing the annual demand,D,by 2.

Accepted Answer

A) True 
 B)False

Question 18

Inventory can take the form of tools and equipment.

Accepted Answer

A) True 
 B)False

Question 19

What is the optimal order quantity?

Accepted Answer

A) 100 
B) 115.47 
C) 200 
D) 500 
A) 100 
B) 115.47 
C) 200 
D) 500

Question 20

What is the approximate minimum total cost associated with the optimal order quantity?

Accepted Answer

A) $66,750 
B) $66,732 
C) $63,950 
D) $63,000 
A) $66,750 
B) $66,732 
C) $63,950 
D) $63,000

Exam 18: Inventory Management

A service level of 95% means there is a 0.95 probability

Drugstores are one example of a business using a periodic inventory system because of their dependence on vendor-managed inventory.

What is the discount order quantity using a purchase price of $130?

A quantity discount is a price discount available if a predetermined number of units is ordered.

________________ is additional inventory kept at various stages of the production process to provide independence between stages to avoid work stoppages.

Inventory management is concerned with how much to order and when to order.

The EOQ model determines the optimal order size that minimizes the sum of carrying costs and shortage costs.

A company may purchase larger amounts of inventory for all the following reasons except

As the level of inventory increases to provide better customer service,quality-related customer service costs decrease.

The demand for an electronic component is normally distributed with an average daily demand of 500 units and a standard deviation of 50.The lead-time for the component is 9 days.If a service level of 95% is desired then the company's reorder point for this component is approximately

A continuous inventory system is also known as a

A product's usage is normally distributed with a weekly average demand of 2,000 units and a weekly standard deviation of 125.The product's lead time is 4 weeks.Currently,the reorder point for this product is 8,200.If the company would like to have a service level of 95% for this product then

The reorder point is the level of inventory that prompts a new order to be placed in a continuous inventory system.

The average inventory can be calculated by dividing the annual demand,D,by 2.

Inventory can take the form of tools and equipment.

What is the optimal order quantity?

What is the approximate minimum total cost associated with the optimal order quantity?

Introduction to Operations and Supply Chain Management

Supplement Operational Decision-Making Tools: Decision Analysis

Quality Management

Statistical Process Control

Supplement Operational Decision-Making Tools: Acceptance Sampling

Product Design

Service Design

Processes and Technology

Capacity and Facilities

Supplement Operational Decision-Making Tools: Facility Location Models

Human Resources

Supplement Operational Decision-Making Tools: Work Measurement

Project Management

Supply Chain Management Strategy and Design

Global Supply Chain Procurement and Distribution

Supplement Operational Decision-Making Tools: Transportation and Transshipment Models

Forecasting

Supplement Operational Decision-Making Tools: Simulation

Sales and Operations Planning

Supplement Operational Decision-Making Tools: Linear Programming

Enterprise Resource Planning

Lean Systems

Scheduling

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