Question 1

Define shrinkage.Identify three or more examples of shrinkage.

Accepted Answer

Shrinkage is retail inventory

Question 2

Which of the following statements about quantity discounts is FALSE?

Accepted Answer

A) The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. 
B) In inventory management,item cost becomes relevant to order quantity decisions when a quantity discount is available. 
C) If carrying costs are expressed as a percentage of value,EOQ is larger at each lower price in the discount schedule. 
D) The larger the annual demand,the less attractive a discount schedule will be. 
E) The smaller the ordering cost,the less attractive a discount schedule will be. 
A) The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. 
B) In inventory management,item cost becomes relevant to order quantity decisions when a quantity discount is available. 
C) If carrying costs are expressed as a percentage of value,EOQ is larger at each lower price in the discount schedule. 
D) The larger the annual demand,the less attractive a discount schedule will be. 
E) The smaller the ordering cost,the less attractive a discount schedule will be.

Question 3

Which of the following statements about the basic EOQ model is TRUE?

Accepted Answer

A) If the ordering cost were to double,the EOQ would rise. 
B) If annual demand were to double,the EOQ would increase. 
C) If the carrying cost were to increase,the EOQ would fall. 
D) If annual demand were to double,the number of orders per year would increase. 
E) All of the above statements are true. 
A) If the ordering cost were to double,the EOQ would rise. 
B) If annual demand were to double,the EOQ would increase. 
C) If the carrying cost were to increase,the EOQ would fall. 
D) If annual demand were to double,the number of orders per year would increase. 
E) All of the above statements are true.

Question 4

ABC analysis is based upon the principle that:

Accepted Answer

A) all items in inventory must be monitored very closely. 
B) there are usually a few critical items,and many items that are less critical. 
C) an item is critical if its usage is high. 
D) more time should be spent on class "C" items because there are many more of them. 
E) as with grade distributions in many MBA courses,there should be more medium-level "B" items than either "A" or "C" items. 
A) all items in inventory must be monitored very closely. 
B) there are usually a few critical items,and many items that are less critical. 
C) an item is critical if its usage is high. 
D) more time should be spent on class "C" items because there are many more of them. 
E) as with grade distributions in many MBA courses,there should be more medium-level "B" items than either "A" or "C" items.

Question 5

In the quantity discount model,it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

Accepted Answer

A) True 
 B)False

Question 6

Service level is the complement of the probability of a stockout.

Accepted Answer

A) True 
 B)False

Question 7

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50.The production order quantity for this problem is approximately 612 units.What is the average inventory for this problem?

Accepted Answer

A) 61 
B) 245 
C) 300 
D) 306 
E) 490 
A) 61 
B) 245 
C) 300 
D) 306 
E) 490

Question 8

Define service level.

Accepted Answer

The service level is the proba

Question 9

________ is the complement of the probability of a stockout.

Accepted Answer

The answer of ________ is the complement of the probability...

Question 10

Service level is:

Accepted Answer

A) the probability of stocking out. 
B) the probability of not stocking out. 
C) something that should be minimized in retail. 
D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage)for single-period models. 
E) B and D 
A) the probability of stocking out. 
B) the probability of not stocking out. 
C) something that should be minimized in retail. 
D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage)for single-period models. 
E) B and D

Question 11

Joe's Camera shop has a favorite model that has annual sales of 145.The cost to place an order to replenish inventory is $25 per order,and annual inventory holding cost per unit is $20.Assume the store is open 350 days per year.
a.What is the optimal order size?
b.What is the optimal number of orders per year?
c.What is the optimal number of days between orders?
d.What is the annual holding and setup cost?

Accepted Answer

a.The optimal order size is Q* = @#IMG-DLM& = 19.0

Question 12

Work-in-process inventory is devoted to maintenance,repair,and operating materials.

Accepted Answer

A) True 
 B)False

Question 13

Demand for ice cream at the Ouachita Dairy can be approximated by a normal distribution with a mean of 47 gallons per day and a standard deviation of 8 gallons per day.The new management desires a service level of 95%.Lead time is four days;the dairy is open seven days a week.What reorder point would be consistent with the desired service level?

Accepted Answer

SS = 1.65 × 8 × @#IMG-DLM& = 2

Question 14

The two most basic inventory questions answered by the typical inventory model are:

Accepted Answer

A) timing of orders and cost of orders. 
B) order quantity and cost of orders. 
C) timing of orders and order quantity. 
D) order quantity and service level. 
E) ordering cost and carrying cost. 
A) timing of orders and cost of orders. 
B) order quantity and cost of orders. 
C) timing of orders and order quantity. 
D) order quantity and service level. 
E) ordering cost and carrying cost.

Question 15

A(n)________ model gives satisfactory answers even with substantial variations in its parameters.

Accepted Answer

The answer of A(n)________ model gives satisfactory answers even with...

Question 16

Which of the following items is mostly likely managed using a single-period order model?

Accepted Answer

A) Christmas trees 
B) canned food at the grocery store 
C) automobiles at a dealership 
D) metal for a manufacturing process 
E) gas sold to a gas station 
A) Christmas trees 
B) canned food at the grocery store 
C) automobiles at a dealership 
D) metal for a manufacturing process 
E) gas sold to a gas station

Question 17

Consider a local club selling Christmas trees.If demand is normal with a mean of 200 and a standard deviation of 50,how many trees should the club stock if service level must be greater than 95%?

Accepted Answer

The Z-value for a 95

Question 18

Demand for gallons of milk (a perishable item)is normally distributed with a weekly mean of 50 and standard deviation of 15.How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?

Accepted Answer

Z for 50% is 0,Z for 80% is .8

Question 19

The demand for automobiles would be considered as independent demand.

Accepted Answer

A) True 
 B)False

Question 20

A product has a reorder point of 260 units,and is ordered ten times a year on average.The following table shows the historical distribution of demand values observed during lead time.
   Currently,stockouts are valued at $5 per unit per occurrence,while inventory carrying costs are $2 per unit per year.Should the firm add safety stock? If so,how much safety stock should be added?

Accepted Answer

@#IMG-DLM& The current policy is not the

Exam 12: Inventory Management

Define shrinkage.Identify three or more examples of shrinkage.

Which of the following statements about quantity discounts is FALSE?

Which of the following statements about the basic EOQ model is TRUE?

ABC analysis is based upon the principle that:

In the quantity discount model,it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

Service level is the complement of the probability of a stockout.

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50.The production order quantity for this problem is approximately 612 units.What is the average inventory for this problem?

Define service level.

________ is the complement of the probability of a stockout.

Service level is:

Work-in-process inventory is devoted to maintenance,repair,and operating materials.

The two most basic inventory questions answered by the typical inventory model are:

A(n)________ model gives satisfactory answers even with substantial variations in its parameters.

Which of the following items is mostly likely managed using a single-period order model?

Consider a local club selling Christmas trees.If demand is normal with a mean of 200 and a standard deviation of 50,how many trees should the club stock if service level must be greater than 95%?

Demand for gallons of milk (a perishable item)is normally distributed with a weekly mean of 50 and standard deviation of 15.How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?

The demand for automobiles would be considered as independent demand.

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