The average inventory level is inversely related to order size... Determine: A the order quantity that will minimize the sum of ordering and holding boxes of staples B the annual cost of
Trang 28 DVD recorders would be an example of independent demand items
15 In the A-B-C approach, C items typically represent about 15 percent of the number of items, but
60 percent of the dollar usage
Trang 317 The average inventory level is inversely related to order size
Trang 426 In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve
Trang 535 Profit margins tend to be inversely related to inventory turns
Trang 645 When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill
Trang 755 The cost of placing an order is a function of order size
60 Which of the following is not one of the assumptions of the basic EOQ model?
A Annual demand requirements are known and constant
B Lead time does not vary
C Each order is received in a single delivery
D Quantity discounts are available
E All of the above are necessary assumptions
61 Which of the following interactions with vendors would potentially lead to inventory reductions?
A reduce lead times
B increase safety stock
C less frequent purchases
D larger batch quantities
E longer order intervals
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62 A non-linear cost related to order size is the cost of:
C amount in the first bin
D optimum stocking level
65 Dairy items, fresh fruit and newspapers are items that:
A do not require safety stocks
B cannot be ordered in large quantities
C are subject to deterioration and spoilage
D require that prices be lowered every two days
E have minimal holding costs
66 Which of the following is least likely to be included in order costs?
A processing vendor invoices for payment
B moving delivered goods to temporary storage
C inspecting incoming goods for quantity
D taking an inventory to determine how much is needed
E temporary storage of delivered goods
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67 In an A-B-C system, the typical percentage of the number of items in inventory for A items is about:
68 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:
A A items
B B items
C C items
D A items plus B items
E B items plus C items
D A items plus B items
E B items plus C items
70 The purpose of "cycle counting" is to:
A count all the items in inventory
B count bicycles and motorcycles in inventory
C reduce discrepancies between inventory records and actual
D reduce theft
E count 10% of the items each month
71 The EOQ model is most relevant for which one of the following?
A ordering items with dependent demand
B determination of safety stock
C ordering perishable items
D determining fixed interval order quantities
E determining fixed order quantities
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72 Which is not a true assumption in the EOQ model?
A Production rate is constant
B Lead time doesn't vary
C No more than 3 items are involved
D Usage rate is constant
E No quantity discounts
73 In a supermarket, a vendor's restocking the shelves every Monday morning is an example of:
A safety stock replenishment
B economic order quantities
B It is four times its previous amount
C It is half its previous amount
D It is about 70 percent of its previous amount
E It increases by about 40 percent
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77 In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will:
A double
B increase, but not double
C decrease by a factor of two
D remain the same
E none of the above
78 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:
81 Which of the following is not true for Economic Production Quantity model?
A Usage rate is constant
B Production rate exceeds usage rate
C Run size exceeds maximum inventory
D There are no ordering or setup costs
E Average inventory is one-half maximum inventory
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82 Given the same demand, setup/ordering costs, and carrying costs, the EOQ calculated using incremental replenishment will be if instantaneous replenishment was assumed:
A greater than the EOQ
B equal to the EOQ
C smaller than the EOQ
D greater than or equal to the EOQ
E smaller than or equal to the EOQ
C be to the left of the price break quantity for that price
D have the largest quantity compared to other EOQ's
E none of the above
86 Which one of the following is not generally a determinant of the reorder point?
A rate of demand
B length of lead time
C lead time variability
D stockout risk
E purchase cost
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87 If no variations in demand or lead time exist, the ROP will equal:
A the EOQ
B expected usage during lead time
C safety stock
D the service level
E the EOQ plus safety stock
89 Which one of the following is implied by a "lead time" service level of 95 percent?
A Approximately 95 percent of demand during lead time will be satisfied
B Approximately 95 percent of inventory will be used during lead time
C The probability is 95 percent that demand during lead time will exactly equal the amount on hand
at the beginning of lead time
D The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time
E none of the above
90 Which one of the following is implied by an "annual" service level of 95 percent?
A Approximately 95 percent of demand during lead time will be satisfied
B The probability is 95 percent that demand will exceed supply during lead time
C The probability is 95 percent that demand will equal supply during lead time
D The probability is 95 percent that demand will not exceed supply during lead time
E None of the above
91 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?
A 60 x 2
B 60 times the square root of 2
C 60 times the square root of 10
D 60 x 10
E none of the above
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92 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?
A 20 x 2
B 20 x 10
C 2 times the square root of 20
D 2 times the square root of 10
E none of the above
93 All of the following are possible reasons for using the fixed order interval model except:
A Supplier policy encourages use
B Grouping orders can save in shipping costs
C The required safety stock is lower than with an EOQ/ROP model
D It is suited to periodic checks of inventory levels rather than continuous monitoring
E Continuous monitoring is not practical
Trang 1597 In the single-period model, if excess cost is double shortage cost, the approximate stockout risk, assuming an optimum service level, is _ percent
C both internal and external inventories
D safety stock elimination
E optimizing reorder points
100 An operations strategy for inventory management should work towards:
A increasing lot sizes
B decreasing lot sizes
C increasing safety stocks
D decreasing service levels
E increasing order quantities
Trang 16102 An operations strategy which recognizes high carrying costs and reduces ordering costs will result in:
A unchanged order quantities
B slightly decreased order quantities
C greatly decreased order quantities
D slightly increased order quantities
E greatly increased order quantities
103 The need for safety stocks can be reduced by an operations strategy which:
A increases lead time
B increases lead time variability
C increases lot sizes
D decreases ordering costs
E decreases lead time variability
106 The fixed order interval model would be most likely to be used for this situation:
A A company has switched from mass production to lean production
B Production is done in batches
C Spare parts are ordered when a new machine is purchased
D Grouping orders can save shipping costs
E none of these
Trang 17
107 Which item would be least likely to be ordered under a fixed order interval system?
A textbooks at a college bookstore
B auto parts at an assembly plant
C cards at a gift shop
D canned peas at a supermarket
E none of these
108 Which one of these would not be a factor in determining the reorder point?
A the EOQ
B the lead time
C the variability of demand
D the demand or usage rate
E all are factors
109 A car rental agency uses 96 boxes of staples a year The boxes cost $4 each It costs $10 to order staples, and carrying costs are $0.80 per box on an annual basis
Determine:
(A) the order quantity that will minimize the sum of ordering and holding boxes of staples
(B) the annual cost of ordering and carrying the boxes of staples
(A) The economic order quantity
(B) The total cost of carrying the cloths (excluding purchase price)
(C) The average inventory
Trang 18
111 A shop that makes candles offers a scented candle, which has a monthly demand of 360 boxes Candles can be produced at a rate of 36 boxes per day The shop operates 20 days a month
Assume that demand is uniform throughout the month Setup cost is $60 for a run, and holding cost is
$2 per box on a monthly basis
Determine the following:
(A) the economic run size
(B) the maximum inventory
(C) the number of days in a run
Trang 19114 The operator of a concession at a downtown location estimates that he will sell 400 bags of circus peanuts during a month Carrying costs are 17 percent of unit price and ordering cost is $22 The price schedule for bags of peanuts is: 1 to 199, $1.00 each; 200 to 499, $.94 each; and 500 or more $.87 each What order size would be most economical?
116 Suppose that usage of cooking oil at Harry's Fish Fry is normally distributed with an average of
15 gallons/day and a standard deviation of two gallons/day Harry has just fired the manager and taken over operating the restaurant himself Harry has asked you to help him decide how to reorder cooking oil in order to achieve a service level which is seven times the risk of stockout (7/8) Lead time is eight days Assume that cooking oil can be ordered as needed
Trang 20118 A manager reorders lubricant when the amount on-hand reaches 422 pounds Average daily usage is 45 pounds, which is normally distributed with a standard deviation of three pounds per day Lead time is nine days What is the risk of a stockout?
119 Given the following information:
Order quantity = 300; = 20 units; desired lead time service level = 86
Find:
(A) the expected number of units short per cycle
(B) the annual service level
(A) How many runs per year will there be?
(B) While production is occurring, how many parts per day are being added to inventory?
(C) Assuming that production begins when there are no parts on hand, what is the maximum number
of parts in inventory?
(D) The machine is dedicated to this product Every so often, preventive maintenance, which requires six working days, must be performed on it Does this interrupt production cycles, or is there enough time between cycles to perform the maintenance? Explain
Trang 21
121 The injection molding department of a company uses 40 pounds of a powder a day Inventory is reordered when the amount on hand is 240 pounds Lead time averages five days It is normally distributed and has a standard deviation of two days What is the probability of a stockout during lead time?
123 The manager of a bakery orders three 'cake-to-go' wedding cakes every Saturday to
accommodate last minute purchases Demand for the cakes can be described by a Poisson
distribution that has a mean of 2 The cakes cost $10 each to prepare, and they sell for $26 each Any cakes that haven't been sold by the end of the day are sold for half price the next day Usually, half of those are sold and the rest are tossed What stocking level would be appropriate?
Trang 22
124 A manager has just received a revised price schedule from a vendor What order quantity should the manager use in order to minimize total costs? Annual Demand is 120 units, ordering cost is $8, and annual carrying cost is $1 per unit
A manufacturer is contemplating a switch from buying to producing a certain item Setup cost would
be the same as ordering cost The production rate would be about double the usage rate
Trang 23
127 At what point should he reorder Stein beer?
Trang 24
132 At what point should she reorder pepperoni?
Trang 25The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine, which only dispenses $100 bills She estimates that this machine dispenses an average of 12,500 bills per month, and that carrying a bill in inventory costs 10 percent of its value annually She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days
140 If she were to order 6,000 bills at a time, what would be the average monthly total costs,
EXCLUDING the value of the bills?
Trang 26141 What is the economic order quantity?
Trang 27145 For the economic order quantity, what is the average inventory level?
Trang 28
149 At what point should resin be reordered?
Trang 29154 A firm stocks a seasonal item that it buys for $22/unit and sells for $29 unit During the season, daily demand can be described using a Poisson distribution with a mean of 2.4 Because of the
nature of the item, units remaining at the close of business each day must be removed at a cost of $2 each What is the optimum stocking level, and what is the effective service level?
156 A restaurant prepares Peking Duck daily at a cost of $18 per duck Each duck generates
revenue of $47 if sold Demand for Peking Duck can be described by a Poisson distribution with a mean of 4.2 ducks per day Unsold ducks at the end of each day are converted to duck soup at an additional cost of $5 over and above the resulting value as soup How many ducks should be
prepared each day?
Trang 30
158 A manager intends to order a new machine and must now decide on the number of spare parts
to order along with the machine The parts cost $400 each and have no salvage value The manager has compiled a frequency distribution for the probable usage of spare parts, as shown For what range of shortage costs would stocking one spare part constitute an optimal decision?
Trang 31161 If unsold copies can be returned for half credit and copies sell for $4.25 each, find the optimal stocking level
Trang 32Topic Area: The Nature and Importance of Inventories
2 The objective of inventory management is to minimize the cost of holding inventory
Topic Area: Requirements for Effective Inventory Management
3 A retail store that carries twice the inventory as its competitor will provide twice the customer service level
Trang 334 The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable
Topic Area: The Nature and Importance of Inventories
5 The two main concerns of inventory control relate to the costs and the level of customer service
Topic Area: The Nature and Importance of Inventories
6 To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and size of orders
Trang 347 In the EOQ formula, holding costs under 10% are expressed as percentages, above 10% are expressed as annual unit costs
Topic Area: How Much to Order: Economic Order Quantity Models
8 DVD recorders would be an example of independent demand items
Topic Area: Introduction
9 Reorder point models are primarily used for dependent demand items
Trang 3510 An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier
Topic Area: Requirements for Effective Inventory Management
11 Decoupling operations applies to the railroad industry
Topic Area: The Nature and Importance of Inventories
12 Interest, insurance, and opportunity costs are all associated with holding costs
Topic Area: Requirements for Effective Inventory Management
13 The A-B-C approach involves classifying inventory items by unit cost, with expensive items classified as ‘A' items and low cost items classified as ‘C' items
Trang 3614 An inventory buffer adds value and lowers cost in all supply chains
Topic Area: The Nature and Importance of Inventories
15 In the A-B-C approach, C items typically represent about 15 percent of the number of items, but
60 percent of the dollar usage
Topic Area: Requirements for Effective Inventory Management
16 EOQ inventory models are basically concerned with the timing of orders
Topic Area: How Much to Order: Economic Order Quantity Models
17 The average inventory level is inversely related to order size
Trang 3718 The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases
Topic Area: How Much to Order: Economic Order Quantity Models
19 The EOQ should be regarded as an approximate quantity rather than an exact quantity Thus, rounding the calculated value is acceptable
Topic Area: How Much to Order: Economic Order Quantity Models
20 Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost
Trang 3821 Understocking an inventory item is a sure sign of inadequate inventory control
Topic Area: Reorder Point Ordering
22 Annual ordering cost is inversely related to order size
Topic Area: How Much to Order: Economic Order Quantity Models
23 The total cost curve is relatively flat near the EOQ
Topic Area: How Much to Order: Economic Order Quantity Models
24 Because price isn't a factor in the EOQ formula, quantity discounts won't affect EOQ calculations
Trang 3925 In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve
Topic Area: How Much to Order: Economic Order Quantity Models
26 In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve
Topic Area: How Much to Order: Economic Order Quantity Models
27 ROP models indicate to managers the time between orders
Topic Area: Reorder Point Ordering
28 When to order can be calculated by the ROP and expressed as a quantity
Trang 4029 The rate of demand is an important factor in determining the ROP
Topic Area: Reorder Point Ordering
30 The inventory value of the supply chain exceeds the inventory value of the organization's work in process inventory
Topic Area: The Nature and Importance of Inventories
31 Safety stock is held because we anticipate future demand
Topic Area: Reorder Point Ordering
32 Variability in demand and/or lead time can be compensated for by safety stock