Question 1

In an ABC analysis,class ________ SKUs,which typically make up ________ % of the SKUs,account for only about 5% of the dollar usage.

Accepted Answer

The answer of In an ABC analysis,class ________ SKUs,which typically...

Question 2

A stock-keeping unit (SKU)is an individual item or product that has an identifying code and is held in inventory somewhere along the supply chain.

Accepted Answer

A) True 
 B)False

Question 3

What is a base-stock system?

Accepted Answer

The answer of What is a base-stock system?...

Question 4

Scenario 9.11
Demand = 50,000 units/week
Standard deviation of weekly demand = 15,000 units
Average lead time = 8 weeks
Standard deviation of lead time: 3 weeks
Cycle-service level = 80%
A continuous review system is used to control inventory.
A normal distribution table is appended to this exam.
-Use the information in Scenario 9.11.If the firm decides to increase its cycle-service level to 90%,what is the new reorder point if all other parameters remain the same for this product?

Accepted Answer

A) greater than 550,000 units 
B) greater than 400,000 units but less than or equal to 550,000 units 
C) greater than 250,000 units but less than or equal to 400,000 units 
D) greater than 150,000 units but less than or equal to 250,000 units 
E) greater than 0 but less than or equal to 150,000 units

Question 5

A(n)________ system is a visual system in which an item's inventory is stored at two different locations.

Accepted Answer

The answer of A(n)________ system is a visual system in...

Question 6

Scenario 9.7
Cranium,Inc. ,purchases term papers from an overseas supplier under a continuous review system.The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day.It costs $60 to process each order and there is a five-day lead-time.The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level.Cranium operates 200 days per year.A normal distribution table is appended to this exam.
-Use the information in Scenario 9.7.What is the cost of holding the safety stock necessary to maintain the 98% service level?

Accepted Answer

A) less than or equal to $30 
B) greater than $30 but less than $40 
C) greater than $40 but less than $50 
D) greater than $50

Question 7

Scenario 9.3
The Talbot Company uses electrical assemblies to produce an array of small appliances.One of its high cost / high volume assemblies,the XO-01,has an estimated annual demand of 8,000 units.Talbot estimates the cost to place an order is $50,and the holding cost for each assembly is $20 per year.The company operates 250 days per year.
-Use the information in Scenario 9.3.The purchasing manager decides that,in order to save purchasing time,orders for the XO-01 will be placed every three months,or four times per year.How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity)?

Accepted Answer

A) greater than $18,000 
B) greater than $14,000 but less than or equal to $18,000 
C) greater than $10,000 but less than or equal to $14,000 
D) less than or equal to $10,000

Question 8

________ occurs when inventory is stolen by employees and customers or when the inventory cannot be sold at full value owing to model changes or low demand.

Accepted Answer

The answer of ________ occurs when inventory is stolen by...

Question 9

A ________ lever is one that must be activated if inventory is to be reduced.

Accepted Answer

The answer of A ________ lever is one that must...

Question 10

Scenario 9.3
The Talbot Company uses electrical assemblies to produce an array of small appliances.One of its high cost / high volume assemblies,the XO-01,has an estimated annual demand of 8,000 units.Talbot estimates the cost to place an order is $50,and the holding cost for each assembly is $20 per year.The company operates 250 days per year.
-Use the information in Scenario 9.3.What is the economic order quantity for the XO-01?

Accepted Answer

A) less than or equal to 100 units 
B) greater than 100 units but less than or equal to 180 units 
C) greater than 180 units but less than or equal to 250 units 
D) greater than 250 units

Question 11

What production strategies should not employ an EOQ approach to ordering? Why?

Accepted Answer

The answer of What production strategies should not employ an...

Question 12

Sensitivity analysis on the economic order quantity (EOQ)formula can help the operations manager answer several questions on how to manage inventories.Which one of the following questions is NOT answered by EOQ sensitivity analysis?

Accepted Answer

A) How critical are errors in estimating demand (
D) ,inventory holding cost (H),and setup cost (S)? 
B) What should happen to lot sizes if interest rates drop? 
C) What should happen to cycle inventory if the demand rate increases? 
D) What should happen to lot sizes if supply and lead-time uncertainty increase?

Question 13

Which one of the following statements is BEST?

Accepted Answer

A) A P system requires more safety stock than a Q system. 
B) A P system lends itself more to quantity discounts than does a Q system. 
C) A P system requires more administrative control and computer support than does a Q system. 
D) In a periodic review system,the value of Q is kept the same from one cycle to another.

Question 14

If on-hand inventory = 100 units,scheduled receipts = 100 units and backorders = 100 units,the Inventory Position (IP)is 100 units.

Accepted Answer

A) True 
 B)False

Question 15

________ are the basic tactics for reducing inventories in supply chains.

Accepted Answer

The answer of ________ are the basic tactics for reducing...

Question 16

Scenario 9.7
Cranium,Inc. ,purchases term papers from an overseas supplier under a continuous review system.The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day.It costs $60 to process each order and there is a five-day lead-time.The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level.Cranium operates 200 days per year.A normal distribution table is appended to this exam.
-Use the information in Scenario 9.7.What is the EOQ for these papers?

Accepted Answer

A) less than or equal to 3,000 units 
B) greater than 3,000 units but less than or equal to 4,000 units 
C) greater than 4,000 units but less than or equal to 5,000 units 
D) greater than 5,000 units

Question 17

A company governed by an EOQ system decides to move in a more lean direction and hopes to reduce their Q as much as possible.What specific steps might be taken to help them in their journey towards a Q = 1?

Accepted Answer

The answer of A company governed by an EOQ system...

Question 18

An inventory system answers two important questions: when to order and how much to order.Which of the following statements correctly explains how a Q system (continuous review system)or a P system (periodic review system)answers these questions?

Accepted Answer

A) Under a Q system,a fixed quantity is ordered every P time period. 
B) Under a Q system,an order is placed to replenish the inventory position up to the target level T when the inventory position reaches the reorder point R. 
C) Under a P system,a fixed quantity Q is ordered when the inventory position reaches the reorder point R. 
D) Under a P system,an order is placed to replenish the inventory position up to the target level T every P time periods.

Question 19

Scenario 9.4
The Mwongola Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes.One of these gear assemblies,the "Smooth Shifter",is used for the two most expensive of Burdell's four models,and has an estimated annual demand of 300 units.Burdell estimates the cost to place an order is $40,and the holding cost for each assembly is $60 per year.The company operates 250 days per year.
-Use the information in Scenario 9.4.What is the total annual holding and ordering costs if Mwongola orders using the EOQ quantity?

Accepted Answer

A) greater than $1,500 
B) greater than $1,000 but less than or equal to $1,500 
C) greater than $750 but less than or equal to $1,000 
D) less than or equal to $750

Question 20

Vilas County Hospital consumed 400 boxes of bandages per week last year.The price of bandages was $80 per box,and the hospital operates 52 weeks per year.The cost of processing an order was $64,and the cost of holding one box throughout a full year was 20% of the value of the material. Last year the hospital ordered bandages,on average,once every two weeks,each time ordering 800 boxes.What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied?

Accepted Answer

A) less than or equal to $650 
B) more than $650 and less than $1,050 
C) more than $1,050 and less than $1,450 
D) more than $1,450

Exam 9: Inventory Management

In an ABC analysis,class SKUs,which typically make up % of the SKUs,account for only about 5% of the dollar usage.