MGMT CH13 Inventory Management

Which of the following is not one of the assumptions of the basic EOQ model?

Quantity discounts are available

Which of the following interactions with vendors would potentially lead to inventory reductions?

Reducing lead times

Dairy items, fresh fruit and newspapers are items that:

Subject to determination and spoilage

Which of the following is least likely to be included in order costs?

Temporary storage of delivered goods

In an A-B-C system, the typical percentage of the number of items in inventory for A items is about:

10

In the A-B-C classification system, items which account for fifteen percent of the total dollar-volume for a
majority of the inventory items would be classified as:

C items

In the A-B-C classification system, items which account for sixty percent of the total dollar-volume for few
inventory items would be classified as:

A items

The EOQ model is most relevant for which one of the following?

Determining fixed order quantities

In a supermarket, a vendor’s restocking the shelves every Monday morning is an example of:

Fixed Order interval

In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will:

Remain the same because EOQ is about how much to order, not when to order

Which one of the following is not generally a determinant of the reorder point?

Purchase Cost

If no variations in demand or lead time exist, the ROP will equal:

Expected usage during lead time because R=dL

Which one of the following is implied by a "lead time" service level of 95 percent?

The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time

All of the following are possible reasons for using the fixed order interval model except:

The required safety stock is lower than with an EOQ/ROP model

Which of these products would be most apt to involve the use of a single-period model?

Fresh fish

The management of supply chain inventories focuses on:

both internal and external inventories

An operations strategy for inventory management should work towards:

decreasing lot sizes

An operations strategy which recognizes high carrying costs and reduces ordering costs will result in:

greatly decrease order quantities

The need for safety stocks can be reduced by an operations strategy which:

decrease lead time variaility

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probably
be classified as:

C items

The fixed order interval model would be most likely to be used for this situation:

Grouping orders can save shipping costs

Which one of these would not be a factor in determining the reorder point?

The EOQ

Which of the following interactions with vendors would potentially lead to inventory reductions?

Reduce lead times

A non-linear cost related to order size is the cost of:

Receiving

In a two-bin inventory system, the amount contained in the second bin is equal to the:

ROP

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves:

Do not line up

Dairy items, fresh fruit and newspapers are items that:

Are subject to deterioration and spoilage

Which of the following is least likely to be included in order costs?

Temporary storage of delivered goods

The purpose of "cycle counting" is to:

reduce discrepancies between inventory records and actual

The EOQ model is most relevant for which one of the following?

Determining fixed order quantaties

Which is not a true assumption in the EOQ model?

No more than 3 items are involved

In a supermarket, a vendor’s restocking the shelves every Monday morning is an example of:

Fixed order interval

A cycle count program will usually require that ‘A’ items be counted:

More frequently than annually

A risk avoider would want ______ safety stock

More

In the basic EOQ model, if annual demand doubles, the effect on the EOQ is:

It increases by about 40 percent

In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will:

Remain the same

In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of:

20 Square root 2540)/(1)=20

In the basic EOQ model, if D = 60 per month, S = $12, and H = $10 per unit per month, EOQ is

12 Square Root (21260)/(10)=12

In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately:

Square Root (25015)/(2)=27.386

Which of the following is not true for Economic Production Quantity model?

There are no ordering set up costs

Given the same demand, setup/ordering costs, and carrying costs, the EOQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed:

Greater than the EOQ

The introduction of quantity discounts will cause the optimum order quantity to be

Unchanged or greater

A fill rate is the percentage of _____ filled by stock on hand

Demand

In the quantity discount model, with carrying cost stated as a percentage of unit purchase price, in order for the EOQ of the lowest curve to be optimum, it must

Be in a feasible range

Which one of the following is not generally a determinant of the reorder point?

Purchase Cost

If no variations in demand or lead time exist, the ROP will equal:

Expected usage during lead time

If average demand for an inventory item is 200 units per day, lead time is three days, and safety stock is 100 units, the reorder point is:

700 (200*3)+100=700 The ROP will be the safety stock added to the product of the demand rate and the lead time.

Which one of the following is implied by a "lead time" service level of 95 percent?

The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time

Which one of the following is implied by an "annual" service level of 95 percent?

None of the above

Daily usage is exactly 60 gallons per day. Lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days. What is the standard deviation of demand during lead time?

60*2 The standard deviation of demand during lead time is the square root of squared demand times the squared standard deviation of lead time

Lead time is exactly 20 days long. Daily demand is normally distributed with a mean of 10 gallons per day and a standard deviation of 2 gallons. What is the standard deviation of demand during lead time?

2 times the square root of 20 The standard deviation of demand during lead time equals the daily standard deviation of demand times the square root of the lead time.

All of the following are possible reasons for using the fixed order interval model except:

The required safety stock is lower than with an EOQ/ROP model

Which of these products would be most apt to involve the use of a single-period model?

fresh fish

In a single-period model, if shortage and excess costs are equal, then the optimum service level is:

.50 The ratio of shortage cost to shortage plus excess cost is 0.5.

In a single-period model, if shortage cost is four times excess cost, then the optimum service level is ___ percent.

80 The ratio of shortage cost to shortage plus excess cost is .8

In the single-period model, if excess cost is double shortage cost, the approximate stockout risk, assuming an optimum service level, is ___ percent

67

If, in a single-period inventory situation, the probabilities of demand being 1, 2, 3, or 4 units are .3, .3, .2, and .2, respectively. If two units are stocked, what is the probability of selling both of them?

.7 both units will be sold of demand is for 2,3,4 units

The management of supply chain inventories focuses on:

Both external and internal inventories

Cycle stock inventory is intended to deal with ________.

Expected demand

An operations strategy which recognizes high carrying costs and reduces ordering costs will result in:

Greatly decrease order quantaties

The need for safety stocks can be reduced by an operations strategy which:

Decrease lead time and variability

If average demand for an item is 20 units per day, safety stock is 50 units, and lead time is four days, the ROP will be:

130 (20*4)+50=130 Multiply the demand rate by the lead time and add the safety stock

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probably be classified as:

C Low dollar volume items tend to be classified as C items.

The fixed order interval model would be most likely to be used for this situation

Grouping orders can save shipping costs

Which item would be least likely to be ordered under a fixed order interval system?

Auto parts at an assembly plant

Which one of these would not be a factor in determining the reorder point?

the EOQ