chapter 13

A stock or store of goods is called a(n):

E. inventory.

Which of the following is typically the largest of all inventory costs?

B. purchase cost

Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances

C. shortage costs

If there are shipping cost economies that result from bundling orders for different items together, the __________ model becomes a relatively more attractive option.

D. fixed-order-interval

Average demand for a particular item is 1,200 units per year. It costs $100 to place an order for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed-order-interval model is chosen in this instance, how often

A. once a month

Weekly demand for a particular item averages 30 units, with a standard deviation of 4. This item is managed with a fixed-order-interval model. The order interval is three weeks, and this item has a certain lead time of one week. The desired service level

B. 93

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

D. Quantity discounts are available.

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

A. reduced lead times

A nonlinear cost related to order size is the cost of:

D. receiving.

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

A. ROP.

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

C. do not line up.

Dairy items, fresh fruit, and newspapers are items that:

C. are subject to deterioration and spoilage.

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

E. 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:

A. 10.

In the A-B-C classification system, items which account for 15 percent of the total dollar volume for a majority of the inventory items would be classified as:

C. C items.

In the A-B-C classification system, items which account for 60 percent of the total dollar volume for few inventory items would be classified as:

A. A items.

The purpose of cycle counting is to:

C. reduce discrepancies between inventory records and actual quantities.

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

E. determining fixed order quantities

Which is not a true assumption in the EOQ model?

C. No more than three items are involved.

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

D. fixed order intervals.

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

E. more often than annually.

A risk avoider would want ______ safety stock.

B. more

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

E. It increases by about 40 percent.

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

D. 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:

A. 20.

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

B. 12.

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

D. 28.

Which of the following is not true for the economic production quantity model?

D. There are no ordering or setup costs.

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

A. greater than the EOQ

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

E. unchanged or greater.

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

B. 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:

B. be in a feasible range.

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

E. purchase cost

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

B. 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:

E. 700 units.

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

D. The probability is .95 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?

E. Approximately 95 percent of all demand will actually be satisfied directly from on-hand inventory.

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 times 2

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?

C. 2 times the square root of 20

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

C. 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?

C. fresh fish

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

C. .50.

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

B. 80

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

B. 67

In a single-period inventory situation, the probabilities that demand will be 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?

C. .7

The management of supply chain inventories focuses on:

C. both internal and external inventories.

An operations strategy for inventory management should work toward:

B. decreasing lot sizes.

Cycle stock inventory is intended to deal with:

D. expected demand.

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

C. greatly decreased order quantities.

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

E. decreases lead time variability.