Exam 9: Inventory Management

When considering dependent / independent demand,in the example of tires and automobiles,the original equipment tires represent ________-demand items,while automobiles represent a(n)________-demand item.

What are the secondary levers for cycle inventory?

Scenario 9.10 The Dolly Llama Farm keeps an average of 50 of those funny creatures on hand and each consumes a pound of grain a day,365 days per year.Grain costs $12 for a 50 pound bag and it costs the farm $10 to make a run to the feed store to pick up an order,regardless of order size.It takes the feed store four days to acquire,mix,and bag the special blend of grains necessary to make the feed the Dolly Llama Farm prefers.Storage costs for the feed runs 15% of the unit cost as the cost of money,loss due to critters,and spoilage all add up. -Refer to Scenario 9.10.The actual usage for grain depends on which llamas show up at feeding time,thus there is an average need for 50 pounds of grain each day with a standard deviation of five pounds.The farm is willing to tolerate a 5% chance of running out of feed before they can get some more hauled in.The llamas would prefer a 0% chance,but they don't get a vote.What reorder point achieves the farm's objectives?

Scenario 9.2 Shipments of Product X from a plant to a wholesaler are made in lots of 600.The wholesaler's average demand for X is 100 units per week.The lead time from the plant to the wholesaler is 4 weeks.The wholesaler pays for the shipments when they leave the plant. -Refer to Scenario 9.2.Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 400 units?

A quantity discount is attractive because there is a drop in the price per unit when the order is sufficiently large.

Scenario 9.5 Tom Bergman,owner and operator of the Earplug Superstore,is reviewing the costs associated with the store's best-selling hearing aid,the BZ15.The data available to Dr.Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cost = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. -Use the information in Scenario 9.5.If Tom orders such that his annual holding cost is twice what his annual ordering cost is,how many units at a time is he ordering?

A store has collected the following information on one of its products: Demand = 4,000 units/year Ordering costs = $15/order Holding costs = $2/unit/year Lead-time = 5 days weeks Number of weeks per year = 50 weeks If a firm uses the continuous review system to control the inventory,what would be the order quantity?

The ________ determines the frequency and quantity to order.

Which one of the following statements concerning the economic order quantity (EOQ)is TRUE?

As the service level increases,the probability of not running out of stock during a cycle decreases.

One of the secondary levers for reducing pipeline inventory is to:

What is generally TRUE about class B SKUs in ABC analysis? They represent about:

Sketch the EOQ cost curves and describe their derivation.

A continuous review system is sometimes called a reorder point system.

Scenario 9.1 Shipments of Product A from a distribution center to a retailer are made in lots of 350.The retailer's average demand for Product A is 75 units per week.The lead time from distributor to retailer is 3 weeks.The retailer pays for the shipments when they leave the distributor.The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350 units per shipment. -Refer to Scenario 9.1.With the change in lead time,the pipeline inventory will:

An item experiences an annual demand of 7,200 units.It costs $8 to hold an item in inventory for one year and $16 to place an order.If the EOQ model is used,what is the time between orders? Assume that there are 52 business weeks in a year.

In an EOQ model,as the annual holding cost for an item increases,the EOQ for the item ________.

Which one of the following statements about inventory control systems is BEST?

Scenario 9.9 "Gollee those cats sure go through a lot of food," Geoff exclaimed as he saw the shopping list pad that had been pre-printed with the words "cat food" a the top.He pondered a different approach to shopping for the furry little darlings,reviewed his shopping records,and discovered the following.The price of cat food has held steady at 89 cents per can.Despite feigning indifference,each of the seven cats nibbles their way through an average of one can per day,three hundred sixty five days a year.The price of gasoline has held constant at $3.50 per gallon and his pickup uses a gallon each way to the cat food store.The cost to hold a can of cat food is 10% of the unit price. -Use the information in Scenario 9.9 to determine the combined cost of goods and inventory policy if Geoff decides to follow the economic order quantity model?

The EOQ is the smallest lot size that a supplier will allow a customer to order.