INVENTORY CHAPTER 12

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QUESTIONS ON INVENTORY 1. Bright Tots Toys manages its inventories by u5lizing a fixed-quan5ty system. Ba=eries and plas5c are included in their inventory. A manager reports that the company frequently finds itself dealing with a stockout of plas5c. The 7-day demand for plas5c is 50 pounds, on average. Further, the standard devia5on of 7-day demand is approximately 5. The lead 5me from the plas5c supplier is 21 days. The acceptable service level is 95 percent, and the number of standard devia5ons required to reach the acceptable service level is 1.645. With all of this in mind, the reorder point for plas5c with safety stock is ________. more than 125 pounds but less than or equal to 175 pounds 2. The demand for apricots in Jacksonville ranges from 250 to 270 tons daily, every day of the year. The demand is sa5sfied daily without any significant issues. This demand for apricots can be categorized as _______. sta5c demand 3. Which type of analysis can solve a single-period inventory problem? Marginal economic analysis. 4. _______ can be described as a surplus amount of inventory that is kept, exceeding the average amount needed to meet demand. Safety stock inventory 5. Recall ABC inventory analysis. Choose the most accurate statement below as it pertains to class C items. They can be managed using automated computer systems. 6. A buyer for Fuzzy Threads, an apparel store, orders ear muffs approximately 6 months before the start of winter. Fuzzy Threads will be holding a March clearance sale to sell any surplus goods leIover aIer the last day of February. Each set of ear muffs costs $100 and sells for $140. The expecta5on is for any remaining stock to be sold off during the March sale at the price of $80. You can assume a uniform probability distribu5on ranging from 200 to 500 items describes the demand. The expected demand is 300. In the context of the single period inventory system, the op5mal order size Q* must sa5sfy the condi5on _______. P(demand ≤ Q*) = 2/3 7. Which of the following is an individual asset or item stored at a par5cular loca5on, within the context of inventory management? Stock-keeping unit 8. Suppose you have an inventory situa5on where a single order is placed for a good. The selling season for that good isn't for some 5me. Furthermore, the demand for that good is uncertain. This scenario characterizes _______. The single period inventory. 9. With 5me series data pa=erns in mind, which type of pa=ern can be described as regular upturns and downturns in a data series which occur over long periods of 5me? Cyclical pa=erns 10. When are moving average (MA) methods most effec5ve? Demand is rela5vely stable and consistent. 11. Of the choices provided, which can be defined as repeatable periods of ups and downs over relatively short periods of time, as it pertains to data patterns and variations in a time series? Seasonal patterns 12. The two most basic inventory ques5ons answered by the typical inventory model are: a. 5ming of orders and cost of orders. b. order quan5ty and cost of orders. c. 5ming of orders and order quan5ty. d. order quan5ty and service level. e. ordering cost and carrying cost.

QUESTIONS ON INVENTORY 13. What is the primary purpose of the basic economic order quan5ty model shown below? Q* = a. to calculate the reorder point, so that replenishments take place at the proper 5me b. to minimize the sum of carrying cost and holding cost c. to maximize the customer service level d. to minimize the sum of setup cost and holding cost e. to calculate the op5mum safety stock 14. If the actual order quan5ty is the economic order quan5ty in a problem that meets the assump5ons of the economic order quan5ty model shown below, the average amount of inventory on hand: 15. Q* = 16. 17. A) is smaller than the holding cost per unit. 18. B) is zero. 19. C) is one-half of the economic order quan5ty. 20. D) is affected by the amount of product cost. 21. E) goes down if the holding cost per unit goes down. 8) Which of the following statements about ABC analysis is FALSE? A) ABC analysis is based on the presump5on that controlling the few most important items produces the vast majority of inventory savings. B) In ABC analysis, "A" items should have 5ghter physical inventory control than "B" or "C" items have. C) In ABC analysis, forecas5ng methods for "C" items may be less sophis5cated than for "A" items. D) ABC analysis is based on the presump5on that all items must be 5ghtly controlled to produce important cost savings. E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can determine item classifica5on in ABC analysis. Answer: D 9) All EXCEPT which of the following statements about ABC analysis are true? A) In ABC analysis, inventory may be categorized by measures other than dollar volume. B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. C) ABC analysis is an applica5on of the Pareto principle. D) ABC analysis suggests that all items require the same high degree of control. E) ABC analysis suggests that there are the cri5cal few and the trivial many inventory items. Answer: D We have an expert-wri=en solu5on to this problem!

QUESTIONS ON INVENTORY 10) ABC analysis is based upon the principle that: A) all items in inventory must be monitored very closely. B) there are usually a few cri5cal items, and many items that are less cri5cal. C) an item is cri5cal if its usage is high. D) more 5me should be spent on class "C" items because there are many more of them. E) as with grade distribu5ons in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items. Answer: B 11) ABC analysis divides on-hand inventory into three classes, generally based upon which of the following? A) item quality B) unit price C) the number of units on hand D) annual demand E) annual dollar volume Answer: E 12) Cycle coun5ng: A) is a process by which inventory records are verified once a year. B) eliminates annual inventory adjustments. C) provides a measure of inventory turnover. D) assumes that all inventory records must be verified with the same frequency. E) assumes that the most frequently used items must be counted more frequently. Answer: B 13) Which of the following statements regarding control of service inventories is TRUE? A) Service inventory is a fic5onal concept, because services are intangible. B) Service inventory needs no safety stock, because there's no such thing as a service stockout. C) Effec5ve control of all goods leaving the facility is one applicable technique. D) Service inventory has carrying costs but no setup costs. E) Good personnel selec5on, training, and discipline are easy. Answer: C 14) Among the advantages of cycle coun5ng is that it: A) makes the annual physical inventory more acceptable to management. B) does not require the detailed records necessary when annual physical inventory is used. C) does not require highly trained people.

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QUESTIONS ON INVENTORY D) allows more rapid iden5fica5on of errors and consequent remedial ac5on than is possible with annual physical inventory. E) does not need to be performed for less expensive items. Answer: D 15) ________ is a method for dividing on-hand inventory into three classifica5ons based on annual dollar volume. Answer: ABC analysis Diff: 1 16) ________ is a con5nuing reconcilia5on of inventory with inventory records. Answer: Cycle coun5ng 1) The demand for automobiles would be considered as independent demand. Answer: TRUE 2) Insurance and taxes on inventory are part of the costs known as setup or ordering costs. Answer: FALSE 3) Which of the following is an element of inventory holding costs? A) housing costs B) material handling costs C) investment costs D) pilferage, scrap, and obsolescence E) All of the above are elements of inventory holding costs. Answer: E We have an expert-wri=en solu5on to this problem! 4) Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones? A) housing costs B) material handling costs C) labor cost D) investment costs E) pilferage, scrap, and obsolescence Answer: E

QUESTIONS ON INVENTORY 1) If setup costs are reduced by substan5al reduc5ons in setup 5me, the produc5on order quan5ty is also reduced. Answer: TRUE 2) The EOQ model is best suited for items whose demand is dependent on other products. Answer: FALSE 3) In the simple EOQ model, if annual demand were to increase, the EOQ would increase propor5onately. Answer: FALSE 4) At the economic order quan5ty, holding costs are equal to product costs. Answer: FALSE 5) In the simple EOQ model, if the carrying cost were to double, the EOQ would also double. Answer: FALSE 6) In the produc5on order quan5ty (POQ) model, inventory does not arrive in a single moment but ﬂows in at a steady rate, resul5ng in a larger produc5on/order quan5ty than in an otherwise iden5cal EOQ problem. Answer: TRUE 7) The reorder point is the inventory level at which ac5on is taken to replenish the stocked item. Answer: TRUE 8) In the quan5ty discount model, it is possible to have a cost-minimizing solu5on where annual ordering costs do not equal annual carrying costs. Answer: TRUE 9) In the quan5ty discount model, the cost of acquiring goods (product cost) is not a factor in determining lot size. Answer: FALSE

QUESTIONS ON INVENTORY 10) The two most basic inventory ques5ons answered by the typical inventory model are: A) 5ming of orders and cost of orders. B) order quan5ty and cost of orders. C) 5ming of orders and order quan5ty. D) order quan5ty and service level. E) ordering cost and carrying cost. Answer: C 11) Which of the following is NOT an assump5on of the economic order quan5ty model shown below? Q* = A) Demand is known, constant, and independent. B) Lead 5me is known and constant. C) Quan5ty discounts are not possible. D) Produc5on and use can occur simultaneously. E) The only variable costs are setup cost and holding (or carrying) cost. Answer: D 12) What is the primary purpose of the basic economic order quan5ty model shown below? Q* = A) to calculate the reorder point, so that replenishments take place at the proper 5me B) to minimize the sum of carrying cost and holding cost C) to maximize the customer service level D) to minimize the sum of setup cost and holding cost E) to calculate the op5mum safety stock Answer: D 13) If the actual order quan5ty is the economic order quan5ty in a problem that meets the assump5ons of the economic order quan5ty model shown below, the average amount of inventory on hand: Q* = A) is smaller than the holding cost per unit. B) is zero. C) is one-half of the economic order quan5ty. D) is affected by the amount of product cost. E) goes down if the holding cost per unit goes down. Answer: C

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QUESTIONS ON INVENTORY 14) A certain type of computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quan5ty? A) 16 B) 70 C) 110 D) 183 E) 600 Answer: C 15) Most inventory models a=empt to minimize: A) the likelihood of a stockout. B) the number of items ordered. C) total inventory-based costs. D) the number of orders placed. E) the safety stock. Answer: C 16) In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will: A) increase by about 41%. B) increase by 100%. C) increase by 200%. D) increase, but more data is needed to say by how much. E) either increase or decrease. Answer: A 17) In the basic EOQ model, if D = 6000 per year, S = $100, and holding cost = $5 per unit per month, what is the economic order quan5ty? A) 24 B) 100 C) 141 D) 490 E) 600 18) Which of the following statements about the basic EOQ model is 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. Which of the following statements about the basic EOQ model is FALSE?

QUESTIONS ON INVENTORY A) If the setup cost were to decrease, the EOQ would fall. B) If annual demand were to double, the number of orders per year would increase. C) If the ordering cost were to increase, the EOQ would rise. D) If annual demand were to double, the EOQ would also double. E) All of the above statements are true. 20) A product whose EOQ is 40 units experiences a decrease in ordering cost from $90 per order to $10 per order. The revised EOQ is: A) three 5mes as large. B) one-third as large. C) nine 5mes as large. D) one-ninth as large. E) cannot be determined Answer: B 21) A product whose EOQ is 400 units experiences a 50% increase in demand. The new EOQ is: A) unchanged. B) increased by less than 50%. C) increased by 50%. D) increased by more than 50%. E) cannot be determined Answer: B 22) For a certain item, the cost-minimizing order quan5ty obtained with the basic EOQ model is 200 units, and the total annual inventory (carrying and setup) cost is $600. What is the inventory carrying cost per unit per year for this item? A) $1.50 B) $2.00 C) $3.00 D) $150.00 E) not enough data to determine 23) A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solu5on for this product will cost ________ per year in total annual inventory (holding and setup) costs. A) $400 B) $800 C) $1200 D) Zero; this is a class C item. E) Cannot be determined because the unit price is not known.

QUESTIONS ON INVENTORY Answer: B 24) A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The cost-minimizing solu5on for this product is to order: A) all 4000 units at one 5me. B) 200 units per order. C) every 20 days. D) 10 5mes per year. E) none of the above Answer: B 25) Which of the following statements regarding the reorder point is TRUE? A) The reorder point is that quan5ty that triggers an ac5on to restock an item. B) There is a reorder point even if lead 5me and demand during lead 5me are constant. C) The reorder point is larger than d × L if safety stock is present. D) A shorter lead 5me implies a smaller reorder point. E) All of the above are true. Answer: E 26) An inventory decision rule states, "When the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is TRUE? A) One hundred is the reorder point, and 14 is the order quan5ty. B) Fourteen is the reorder point, and 100 is the order quan5ty. C) The number 100 is a func5on of demand during lead 5me. D) Fourteen is the safety stock, and 100 is the reorder point. E) None of the above is true. Answer: B 27) Which of the following statements regarding the produc5on order quan5ty model is TRUE? A) It applies only to items produced in the firm's own produc5on departments. B) It relaxes the assump5on that all the order quan5ty is received at one 5me. C) It relaxes the assump5on that the demand rate is constant. D) It minimizes the total produc5on costs. E) It minimizes inventory. Answer: B 28) Which of these statements about the produc5on order quan5ty model is FALSE?

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QUESTIONS ON INVENTORY A) The produc5on order quan5ty model is appropriate when the assump5ons of the basic EOQ model are met, except that receipt is noninstantaneous. B) Because receipt is noninstantaneous, some units are used immediately and not stored in inventory. C) Average inventory is less than one-half of the produc5on order quan5ty. D) All else equal, the smaller the ra5o of demand rate to produc5on rate, the larger is the produc5on order quan5ty. E) None of the above is false. Answer: D 29) The assump5ons of the produc5on order quan5ty model are met in a situa5on where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily produc5on rate is 100. What is the produc5on order quan5ty for this problem? A) 139 B) 174 C) 184 D) 365 E) 548 Answer: C 30) A produc5on order quan5ty problem has a daily demand rate = 10 and a daily produc5on rate = 50. The produc5on order quan5ty for this problem is approximately 612 units. What is the average inventory for this problem? A) 61 B) 245 C) 300 D) 306 E) 490 Answer: B 31) When quan5ty discounts are allowed, the cost-minimizing order quan5ty: A) is always an EOQ quan5ty. B) minimizes the sum of holding and ordering costs. C) minimizes the unit purchase price. D) may be a quan5ty below that at which one qualifies for that price. E) minimizes the sum of holding, ordering, and product costs. Answer: E 32) Which of the following statements about quan5ty discounts is FALSE? A) The cost-minimizing solu5on may or may not be where annual holding costs equal annual ordering costs.

QUESTIONS ON INVENTORY B) In inventory management, item cost becomes relevant to order quan5ty decisions when a quan5ty 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 a=rac5ve a discount schedule will be. E) The smaller the ordering cost, the less a=rac5ve a discount schedule will be. Answer: D 33) ________ is the 5me between placement and receipt of an order. Answer: Lead 5me 34) In an economic order quan5ty problem, the total annual cost curve is at its ________ where annual holding costs equal annual setup costs. Answer: minimum 35) In the EOQ model, for a given level of demand, annual holding cost is larger as the order quan5ty is ________. Answer: larger 36) A(n) ________ model gives sa5sfactory answers even with substan5al varia5ons in its parameters. Answer: robust 37) In the produc5on order quan5ty model, the frac5on of inventory that is used immediately and not stored is represented by the ra5o of ________. Answer: demand rate to produc5on rate 38) ________ is extra stock that is carried to serve as a buffer. Answer: Safety stock 39) In a quan5ty discount problem, if the savings in annual product cost is smaller than the increase in the sum of annual setup cost and annual holding cost, the discount should be ________. Answer: rejected or refused 3) If the standard devia5on of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the sta5s5cal safety stock? A) 8 units

QUESTIONS ON INVENTORY B) 10 units C) 16 units D) 64 units E) Cannot be determined without lead 5me data. Answer: E 4) A specific product has demand during lead 5me of 100 units, with a standard devia5on during lead 5me of 25 units. What safety stock (approximately) provides a 95% service level? A) 41 B) 55 C) 133 D) 140 E) 165 Answer: A 5) Demand for dishwasher water pumps is 8 per day. The standard devia5on of demand is 3 per day, and the order lead 5me is four days. The service level is 95%. What should the reorder point be? A) about 18 B) about 24 C) about 32 D) about 38 E) more than 40 Answer: E 6) The purpose of safety stock is to: A) replace failed units with good ones. B) eliminate the possibility of a stockout. C) eliminate the likelihood of a stockout due to erroneous inventory tally. D) control the likelihood of a stockout due to variable demand and/or lead 5me. E) protect the firm from a sudden decrease in demand. Answer: D We have an expert-wri=en solu5on to this problem! 7) The proper quan5ty of safety stock is typically determined by: A) using a single-period model. B) carrying suﬃcient safety stock so as to eliminate all stockouts. C) mul5plying the EOQ by the desired service level.

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QUESTIONS ON INVENTORY D) seung the level of safety stock so that a given stockout risk is not exceeded. E) minimizing total costs. Answer: D We have an expert-wri=en solu5on to this problem! 8) If demand is not uniform and constant, then stockout risks can be controlled by: A) increasing the EOQ. B) spreading annual demand over more frequent, but smaller, orders. C) raising the selling price to reduce demand. D) adding safety stock. E) reducing the reorder point. Answer: D 9) If daily demand is normally distributed with a mean of 15 and standard devia5on of 5, and lead 5me is constant at 4 days, a 90 percent service level will require how much safety stock? A) 7 units B) 10 units C) 13 units D) 16 units E) 26 units Answer: C 10) If daily demand is constant at 10 units per day, and lead 5me averages 12 days with a standard devia5on of 3 days, 95 percent service requires how much safety stock? A) 28 units B) 30 units C) 49 units D) 59 units E) 114 units Answer: C 11) In a safety stock problem where both demand and lead 5me are variable, demand averages 150 units per day with a daily standard devia5on of 16, and lead 5me averages 5 days with a standard devia5on of 1 day. What is the standard devia5on of demand during lead 5me? A) 15 units B) 100 units C) 154 units D) 500 units

QUESTIONS ON INVENTORY E) 13,125 units Answer: C 12) ________ is the complement of the probability of a stockout. Answer: Service level 13) If a safety stock problem includes parameters for average daily demand, standard devia5on of demand, and lead 5me, then ________ is variable and ________ is constant. Answer: demand; lead 5me 14) When demand is constant and lead 5me is variable, the safety stock computa5on requires three inputs: the value of Z, ________, and the standard devia5on of lead 5me. Answer: daily demand 1) Which of the following items is mostly likely managed using a single-period order model? 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 sta5on Answer: A We have an expert-wri=en solu5on to this problem! 2) The main trait of a single-period model is that: A) inventory has limited value aver a certain period of 5me. B) it has the largest EOQ sizes. C) the order quan5ty should usually equal the expected value of demand. D) supply is limited. E) the cost of a shortage cannot be determined accurately. Answer: A 3) A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard devia5on of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level? A) .60

QUESTIONS ON INVENTORY B) .20 C) .84 D) .40 E) unable to determine given the above informa5on Answer: A 4) Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80. They currently have no salvage value. If the stand owner is able to find an outlet that would provide a salvage value of $0.10, what would be the increase in service level? A) .5 B) 0 C) .07 D) 1 E) unable to determine given only the above informa5on Answer: C 5) Service level is: 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 Answer: E 6) A bakery wants to determine how many trays of doughnuts it should prepare each day. Demand is normal with a mean of 5 trays and standard devia5on of 1 tray. If the owner wants a service level of at least 95%, how many trays should he prepare (rounded to the nearest whole tray)? Assume doughnuts have no salvage value aver the day is complete. A) 5 B) 4 C) 6 D) 7 E) unable to determine with the above informa5on Answer: D 1) The fixed-period inventory model can have a stockout during the review period as well as during the lead 5me, which is why fixed-period systems require more safety stock than fixed- quan5ty systems. Answer: TRUE

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QUESTIONS ON INVENTORY 2) The fixed-period inventory system requires more safety stock than a fixed-quan5ty system because: A) a stockout can occur during the review period as well as during the lead 5me. B) this model is used for products that have large standard devia5ons of demand. C) this model is used for products that require very high service levels. D) replenishment is not instantaneous. E) setup costs and holding costs are large. Answer: A 3) A disadvantage of the fixed-period inventory system is that: A) it involves higher ordering costs than the fixed quan5ty inventory system. B) addi5onal inventory records are required. C) the average inventory level is decreased. D) since there is no count of inventory during the review period, a stockout is possible. E) orders usually are for larger quan55es. Answer: D 4) What is the difference between P and Q inventory systems? A) order size B) order spacing C) maximum service level D) lead 5me length E) A and B Answer: E 5) Which of the following is a requirement of Q systems? A) perpetual inventory system B) constant order spacing C) variable lead 5me D) constant demand E) all of the above Answer: A 6) Q is to ________ systems as P is to ________ systems. A) fixed quan5ty, fixed period B) variable demand, constant demand C) variable lead 5me, variable demand D) variable quan5ty, variable period

QUESTIONS ON INVENTORY E) quality, price Answer: A 7) Which of the following should be higher in P systems than Q systems? A) lead 5me B) demand C) order size D) order spacing E) safety stock Answer: E 8) An advantage of the fixed-period inventory system is that: A) safety stock will be lower than it would be under a fixed-quan5ty inventory system. B) there is no physical count of inventory items when an item is withdrawn. C) no inventory records are required. D) orders usually are for smaller order quan55es. E) the average inventory level is reduced. Answer: B 9) A(n) ________ system triggers inventory ordering on a uniform 5me frequency. Answer: fixed-period (or P) A buyer for Fuzzy Threads, an apparel store, orders ear muffs approximately 6 months before the start of winter. Fuzzy Threads will be holding a March clearance sale to sell any surplus goods leftover after the last day of February. Each set of ear muffs costs $120 and sells for $150. The expectation is for any remaining stock to be sold off during the March sale at the price of $90. You can assume a uniform probability distribution ranging from 200 to 500 items describes the demand. The expected demand is 300. In the context of the single-period inventory system, the optimal order size Q* must satisfy the condition ________. a. P(demand <= Q*) = 1/3 b. P(demand <= Q*) = 1/4 c. P(demand <= Q*) = 1/2 d. P(demand <= Q*) = 1/5 Question 2 1 / 1 pts Which of the following is NOT an assumption of the EOQ model? a. Lead time is constant. b. Order quantity is received all at once. c. Shortages are allowed.

QUESTIONS ON INVENTORY d. Demand rate is known and constant. Question 3 1 / 1 pts In general, as the order size increases ________. a. both ordering and carrying costs increase b. ordering costs increase and carrying costs decrease c. both ordering and carrying costs decrease or d. ordering costs decrease and carrying costs increase Question 4 1 / 1 pts A toy store uses the fixed-quantity system to manage its inventories. Batteries and plastic are included in their inventory. The store manager reports that the company frequently finds itself dealing with a stockout of plastic. The 7-day demand for plastic is 50 pounds, on average. Further, the standard deviation of 7-day demand is approximately 5. The lead time from the plastic supplier is 14 days. The acceptable service level is 95 percent, and the number of standard deviations required to reach the acceptable service level is 1.645. With all of this in mind, the reorder point for plastic with safety stock is ________. a. more than 125 pounds but less than or equal to 175 pounds b. more than 175 pounds but less than or equal to 225 pounds Correct c. less than or equal to 125 pounds d. more than 225 pounds Question 5 1 / 1 pts Consider ABC inventory analysis and its components. For class A items, which of the following statements is most accurate? a. They comprise less than 30 percent of the total dollar usage. b. They can be managed using automated computer systems. c. Correct! d. They require close control by operations managers. e. They account for more than 50 percent of inventory items. Question 6 1 / 1 pts

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QUESTIONS ON INVENTORY Which type of costs can be representative of service interruptions or backorders for external customers, from the standpoint of inventory costs? a. Unit cost of the SKUs Correct! b. Stockout costs c. Holding costs d. Ordering costs Question 7 1 / 1 pts Which of the following statements is most accurate to the fixed-period system (FPS)? It orders a fixed quantity of items when the inventory position reaches or drops below the reorder point (r). a. It maintains a constant order quantity every review period. or b. It orders sufficient stock at the time of review to bring the inventory position up to the replenishment level (M). c. It checks the inventory position on a continuous basis. Question 8 1 / 1 pts Which system or model should be used when the inventory situation is the following: strictly one order is placed for a good in anticipation of a future selling season and its demand is subject to considerable uncertainty? a. A fixed-quantity inventory system orrect! b. The single-period inventory model c. A fixed-period inventory system d. The deliver-lag inventory model Question 9 1 / 1 pts Alex owns a health and beauty store, operating fifty weeks per year. Essenza Conditioner is considered a high margin stock-keeping unit (SKU); however, the product is oftentimes not in stock. He decides to use a fixed-quantity system (FQS) and orders boxes of Essenza Conditioner containing 10 bottles per box from a vendor 160 miles away. He collects the following data regarding the sales of Essenza Conditioner. Demand 10 boxes per week Order Cost $20 per order Item Cost $80 per box per year Inventory-Holding Cost 15 percent per year

QUESTIONS ON INVENTORY Lead Time 3 weeks Standard Deviation in Weekly Demand 6 Service Level 96 percent Based on the data provided, the economic order quantity (EOQ) of the Essenza Conditioner boxes is ________. a. more than 35 but less than or equal to 45 boxes b. more than 25 but less than or equal to 35 boxes c. less than 25 boxes d. more than 55 boxes Question 10 1 / 1 pts Bob Barker, a store owner in New York City, takes night business classes and is forced to consider the economic order quantity (EOQ) model to improve his business. Using the constant demand assumption in the EOQ model, what would Bob’s average cycle inventory be? a. average cycle inventory = the annual demand divided by the number of inventory cycles per year orrect! b. average cycle inventory = half of the order quantity c. average cycle inventory = the order quantity divided by the number of inventory cycles per year d. average cycle inventory = half of the annual usage

INVENTORY CHAPTER 12

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