Q&A Hero

Q: Which statement is correct concerning the role of innovation for small businesses? a. Fortune magazine reports that 93 percent of company founders reported that their business turned out to be nothing like their original venture concept. b. Studies have shown that small entrepreneurial firms produce 95 percent as many innovations per employee as large firms. c. According to Clayton Christensen, 60 percent of all new products end up failing or performing well below expectations. d. Small entrepreneurial firms produce twice as many innovations per employee as large firms.

Q: (a) What is the reorder point if there is no safety stock?(b) What is the reorder point if the service level is 80 percent?(c) How much more safety stock is required if the service level is raised from 80 percent to 90 percent?

Q: To maintain performance, a small business must launch a new competitive advantage a. and keep that competitive advantage alive. b. and make adjustments to that competitive advantage over time. c. that causes rival firms to respond. d. before the current strategy has run its course.

Q: a. What safety stock provides a 50% service level?b. What safety stock provides a 90% service level?c. What safety stock provides a 99% service level?

Q: Arden has designed an artistic design to complement his products name to assist customers in identifying his product. These are commonly as referred to as a: a. brand. b. trademark. c. service mark. d. trade dress.

Q: Daily demand for a product is normally distributed with a mean of 150 units and a standard deviation of 15 units. The firm currently uses a reorder point system, and it seeks a 75% service level during the lead time of 6 days.a. What safety stock is appropriate for the firm?b. What is the reorder point?

Q: Cooking for Collin, a small manufacturer of holiday cakes, sells its product through independent retailers and mail-order marketing. Cooking for Collin is relying on a. a direct channel of distribution. b. an indirect channel of distribution. c. a dual distribution channel. d. a multiple-outlet distribution channel.

Q: The Winfield Distributing Company has maintained an 80% service level policy for inventory of string trimmers. Mean demand during lead time is 170 trimmers, and the standard deviation during lead time is 60 trimmers. The annual cost of carrying one trimmer in inventory is $6. The area sales people have recently told Winfield's management that they could expect a $400 improvement in profit (based on current figures of cost per trimmer) if the service level were increased to 99%. Is it worthwhile for Winfield to make this change?

Q: Carrigan has just launched his new business. He has great plans for expansion later but for now, the most appropriate and effective product strategy to use in this stage of his small business is the _____ product strategy. a. one product/one market b. one product/multiple markets c. multiple products/one market d. The strategy depends on the product or service.

Q: Demand for ice cream at the Ouachita Dairy can be approximated by a normal distribution with a mean of 47 gallons per day and a standard deviation of 8 gallons per day. The new management desires a service level of 95%. Lead time is four days; the dairy is open seven days a week. What reorder point would be consistent with the desired service level?

Q: The product life cycle, as opposed to the competitive advantage life cycle, a. helps an entrepreneur visualize the sales and profits of a product from the time it is introduced until it is no longer on the market. b. details when a strength can be used in the market and when not to attack a rival. c. reflects sales trends for the companys multiple products or services. d. is based on the overall sales of the total product or service line.

Q: Huckaby Motor Services, Inc. rebuilds small electrical items such as motors, alternators, and transformers, all using a certain type of copper wire. The firm's demand for this wire is approximately normal, averaging 20 spools per week, with a standard deviation of 6 spools per week. Cost per spool is $24; ordering costs are $25 per order; inventory handling cost is $4.00 per spool per year. Acquisition lead time is four weeks. The company works 50, 5-day weeks per year. a. What is the optimal size of an order, if minimization of inventory system cost is the objective? b. What are the safety stock and reorder point if the desired service level is 90%?

Q: Before a companys competitive advantage moves into the decline stage, it should a. invest resources to develop a competitive advantage. b. continue deploying the competitive advantage as long as it can. c. slow the decline as much as possible. d. implement previously developed plans for the hidden curves.

Q: The new office supply discounter, Paper Clips, Etc. (PCE), sells a certain type of ergonomically correct office chair that costs $300. The annual holding cost rate is 40% of the item cost, annual demand is 900 units, and the ordering cost is $20 per order. The lead time is 4 days. Because demand is variable (standard deviation of daily demand is 2.4 chairs), PCE has decided to establish a customer service level of 90%. The store is open 300 days per year. a. What is the optimal order quantity? b. What is the safety stock? c. What is the reorder point?

Q: Love Languages is introducing an improved version of its tutoring targeted to students who want more in-depth assistance using a CD format. The company has decided to continue to offer their original tutoring package and aim the new product at the original target market; therefore, they are employing a ____ product strategy. a. multiple products/one market b. multiple products/multiple markets c. modified product/one market d. modified product/multiple markets

Q: Thomas' Bike Shop stocks a high volume item that has a normally distributed demand during lead time. The average daily demand is 70 units, the lead time is 4 days, and the standard deviation of demand during lead time is 15. a. How much safety stock provides a 95% service level to Thomas? b. What should the reorder point be?

Q: Annabelles company makes pottery. She would like to expand her business and is looking for ideas. What advice would you give her? a. Think outside the box; go into a completely different line of products. b. Pursue innovation that customers will perceive as adding excitement to their lives. c. Base innovative efforts on her experience. d. Focus on products or services offered by her largest competitors.

Q: What happens to the cost of safety stock when the service level increases?

Q: If a small firm is to maintain its performance over time, it is essential to a. continue to reinvent themselves. b. extend the competitive advantage of the firm. c. replicate the strategies that have led to success in the past. d. retain the personnel who made the firm successful in the first place.

Q: Define service level.

Q: Buzz-Buzz Express is a small firm that sells honey bees domestically. Once purchased, the bees are flown using FedEx. Buzz-Buzz Express uses a a. common carrier. b. public carrier. c. private carrier. d. contract carrier.

Q: When demand is constant and lead time is variable, the safety stock computation requires three inputs: the value of Z, ________, and the standard deviation of lead time.

Q: Both the physical movement of products and the establishment of intermediary relationships to guide and support the movement of the products are included in a. channels. b. distribution. c. intermediaries. d. logistics.

Q: If a safety stock problem includes parameters for average daily demand, standard deviation of demand, and lead time, then ________ is variable and ________ is constant.

Q: Erica has registered protection for 14 years that covers a new process she has designed. Erica owns a: a. design patent. b. plant patent. c. utility patent. d. Two of the above are correct.

Q: ________ is the complement of the probability of a stockout.

Q: Products must be carefully analyzed in terms of financial considerations in the _____ stage of the product development process. a. business analysis b. idea accumulation c. product testing d. physical product development

Q: In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. What is the standard deviation of demand during lead time? A) 15 units B) 100 units C) 154 units D) 500 units E) 13,125 units

Q: Which statement is true about company growth? a. Successful growth occurs on it own. b. A high-growth firms need for additional financing may exceed its available resources, even though the venture is profitable. c. Inventory needs will increase while account receivables will decrease with growth. d. While rapid growth may stress personnel, the increase in pay will be sufficient.

Q: If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation 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

Q: The distinctive operating image of a product, including features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques, can be protected a. by copyright. b. by patent. c. as trade dress. d. as a registered concept.

Q: A) 7 unitsB) 10 unitsC) 13 unitsD) 16 unitsE) 26 units

Q: A sustainable competitive advantage is a. rarely appreciated by the firm's owners. b. of little consequence to profitability. c. an idealized position that is unachievable in reality. d. a value-creating industry position that is likely to endure over time.

Q: 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.

Q: Thanks to national press, Wonderful Gifts has had 100% more orders placed than last quarter. The company could be caught in a ______ if proper planning does not occur. a. growth net b. growth trap c. profit net d. profit trap

Q: The proper quantity 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) multiplying the EOQ by the desired service level. D) setting the level of safety stock so that a given stockout risk is not exceeded. E) minimizing total costs.

Q: The business analysis stage of new product development is critical since a. one to three years may pass before profits are realized. b. it is hard to attract the 10 percent of the total market that is needed for a new product success. c. products often fail in laboratory and marketing testing. d. All of the above support the importance of the business analysis stage.

Q: 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 time. E) protect the firm from a sudden decrease in demand.

Q: Since Love Languages has decided to sell its tutoring service on CDs through an online site as well as the traditional format of personal tutors, they are relying on a. a direct channel of distribution. b. an indirect channel of distribution. c. a dual distribution channel. d. a multiple-outlet distribution channel.

Q: Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time 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

Q: Pepsico produces and distributes products under the brand names Pepsi, Quaker, Frito-Lay, and many others. This collection of product lines within Pepsicos ownership and control is referred to as the: a. product depth. b. product accumulation. c. product line consistency. d. product mix.

Q: A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides a 95% service level? A) 41 B) 55 C) 133 D) 140 E) 165

Q: A product strategy that includes a new product that is quite different from existing products a. can be more challenging to manage. b. is often used by small businesses. c. will likely determine the future direction of the firm. d. is encouraged, as long as it represents no more than half of the firm's product offerings.

Q: If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock? A) 8 units B) 10 units C) 16 units D) 64 units E) Cannot be determined without lead time data.

Q: The profit curve is the lowest in which stage of the product life cycle? a. Decline b. Growth c. Introduction d. Maturity

Q: Safety stock in inventory systems depends only on the average demand during the lead time.

Q: Service level is the complement of the probability of a stockout.

Q: Innovative packaging is frequently a deciding factor for consumers. a. True b. False Indicate the answer choice that best completes the statement or answers the question.

Q: All small firms want to grow. a. True b. False

Q: Consider a product with a daily demand of 400 units, a setup cost per production run of $100, a monthly holding cost per unit of $2.00, and an annual production rate of 292,000 units. The firm operates and experiences demand 365 days per year. Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model. How much money per year has that mistake cost the company?

Q: Physical distribution of products includes only transportation. a. True b. False

Q: The inventory management costs for a certain product are S=$8 to order, and H=$1 to hold for a year. Annual demand is 2400 units. Consider the following ordering plans: (a) order all 2400 at one time, (b) order 600 once each quarter, and (c) order 200 once each month. Calculate the annual holding and setup costs associated with each plan. (d) Is there another plan, cheaper than any of these? Calculate this order quantity along with its total annual holding and setup costs.

Q: Delivery terms specify which party pays the freight costs, selects carriers, bears the risk of damage, and selects the modes of transport. a. True b. False

Q: Joe's Camera shop has a favorite model that has annual sales of 145. The cost to place an order to replenish inventory is $25 per order, and annual inventory holding cost per unit is $20. Assume the store is open 350 days per year. a. What is the optimal order size? b. What is the optimal number of orders per year? c. What is the optimal number of days between orders? d. What is the annual holding and setup cost?

Q: Packaging has very little to do with increasing the value of the total product by creating a distinctive impression. a. True b. False

Q: An organization has had a policy of ordering 70 units at a time. Their annual demand is 340 units, and the item has an annual carrying cost of $2. The assumptions of the EOQ are thought to apply. For what value of ordering cost would this order size be optimal?

Q: A small firms special signature is called a logo. a. True b. False

Q: Holding costs are $35 per unit per year, the ordering cost is $120 per order, and sales are relatively constant at 300 per month. (a) What is the optimal order quantity? (b) What are the annual holding and setup costs?

Q: A garden center selling two types of mint has one product item in two product lines. a. True b. False

Q: Pointe au Chien Containers, Inc., manufactures in batches, and the manufactured items are placed in stock. Specifically, the firm is questioning how best to manage a specific wooden crate for shipping live seafood, which is sold primarily by the mail/phone order marketing division of the firm. The firm has estimated that carrying cost is $4 per unit per year. In addition, annual demand = 60,000 units, and setup cost is $300. The firm currently plans to satisfy all customer demand from stock on hand. Demand is known and constant. The production rate is nearly instantaneous. a. What is the cost minimizing size of the manufacturing batch? b. What is the total annual holding and setup cost of this solution?

Q: Groundz Coffee Shop uses 4 pounds of a specialty tea weekly; each pound costs $16. Carrying costs are $1 per pound per week because space is very scarce. It costs the firm $8 to prepare an order. Assume the basic EOQ model with no shortages applies. Assume 52 weeks per year, closed on Mondays. a. How many pounds should Groundz order at a time? b. What is total annual cost (excluding item cost) of managing this item on a cost-minimizing basis? c. In pursuing lowest annual total cost, how many orders should Groundz place annually? d. How many days will there be between orders (assume 312 operating days) if Groundz practices EOQ behavior?

Q: Because growth in sales is perceived as good for business, no changes will be needed in personnel, operations, or management style. a. True b. False

Q: If a firm extends a janitorial cleanser from the industrial market to reach the home market, it is following a one product/multiple markets strategy. a. True b. False

Q: A local artisan uses supplies purchased from an overseas supplier. The owner believes the assumptions of the EOQ model are met reasonably well. Minimization of inventory costs is her objective. Relevant data, from the files of the craft firm, are annual demand (D) =150 units, ordering cost (S) = $42 per order, and holding cost (H) = $4 per unit per year a. How many should she order at one time? b. How many times per year will she replenish her inventory of this material? c. What will be the total annual inventory (holding and setup) costs associated with this material (rounded to the nearest dollar)? d. If she discovered that the carrying cost had been overstated, and was in reality only $1 per unit per year, what is the corrected value of EOQ?

Q: Trade dress describes those elements of a firm's distinctive operating image that are specifically protected under a trademark, patent, or copyright. a. True b. False

Q: A direct channel of distribution is one that involves only one intermediary. a. True b. False

Q: The annual demand for an item is 10,000 units. The cost to process an order is $75 and the annual inventory holding cost is 20% of item cost. (a) What is the optimal order quantity, given the following price breaks for purchasing the item? (b) What price should the firm pay per unit? (c) What is the total annual cost at the optimal behavior? Quantity Price 1-9 $2.95 per unit 10 - 999 $2.50 per unit 1,000 - 4,999 $2.30 per unit 5,000 or more $1.85 per unit

Q: Given the complexity of the task, entrepreneurs must use an attorney to conduct a trademark search. a. True b. False

Q: Clement Bait and Tackle has been buying a chemical water conditioner for its bait (to help keep its baitfish alive) in an optimal fashion using EOQ analysis. The supplier has now offered Clement a discount of $0.50 off all units if the firm will make its purchases monthly or $1.00 off if the firm will make its purchases quarterly. Current data for the problem are: D = 720 units per year; S = $6.00, I = 20% per year; P = $25. (a) What is the EOQ at the current behavior? (b) What is the annual total cost, including product cost, of continuing their current behavior? (c) What are the annual total costs, if they accept either of the proposed discounts? (d) At the cheapest of the total costs, are carrying costs equal to ordering costs? Explain.

Q: A growth trap occurs when more cash is needed for a company faster than can be generated in profits. a. True b. False

Q: Holstein Computing manufactures an inexpensive audio card (Audio Max) for assembly into several models of its microcomputers. The annual demand for this part is 100,000 units. The annual inventory carrying cost is $5 per unit and the cost of preparing an order and making production setup for the order is $750. The company operates 250 days per year. The machine used to manufacture this part has a production rate of 2000 units per day. (a) Calculate the optimum lot size. (b) How many lots are produced in a year? (c) What is the average inventory for Audio Max? (d) What is the annual holding and setup cost for Audio Max?

Q: Labeling information can be limited to the minimum legal requirements as the warranty will cover the information. a. True b. False

Q: Louisiana Specialty Foods can produce its famous meat pies at a rate of 1650 cases of 48 pies each per day. The firm distributes the pies to regional stores and restaurants at a steady rate of 250 cases per day. The cost of setup, cleanup, idle time in transition from other products to pies, etc., is $320. Annual holding costs are $11.50 per case. Assume 250 days per year. (a) Determine the optimum production run (batch size). (b) Determine the number of production runs per year. (c) Determine maximum inventory. (d) Determine total inventory-related (setup and carrying) costs per year (rounded to the nearest dollar).

Q: A toy manufacturer makes its own wind-up motors, which are then put into its toys. While the toy manufacturing process is continuous, the motors are intermittent flow. Data on the manufacture of the motors appears below. Annual demand (D) = 50,000 units Daily subassembly production rate = 1,000 Setup cost (S) = $85 per batch Daily subassembly usage rate = 200 Carrying cost = $.20 per unit per year (a) To minimize cost, how large should each batch of subassemblies be? (b) Approximately how many days are required to produce a batch? (c) How long is a complete cycle? (d) What is the average inventory for this problem? (e) What is the total annual inventory cost (holding plus setup) of the optimal behavior in this problem?

Q: Channel management is synonymous with the term logistics. a. True b. False

Q: The Rushton Trash Company stocks, among many other products, a certain container, each of which occupies four square feet of warehouse space. The warehouse space currently available for storing this product is limited to 600 square feet. Demand for the product is 15,000 units per year. Holding costs are $4 per container per year. Ordering costs are $5 per order. (a) What is the cost-minimizing order quantity decision for Rushton? (b) What is the total inventory-related cost of this decision? (c) What is the total inventory-related cost of managing the inventory of this product, when the limited amount of warehouse space is taken into account? (d) What would the firm be willing to pay for additional warehouse space?

Q: Given the following data: D=65,000 units per year, S = $120 per setup, P = $5 per unit, and I = 25% per year, (a) calculate the EOQ, and (b) calculate annual costs of holding and setup following EOQ behavior.

Q: Shippers that own their own means of transport are called private carriers. a. True b. False

Q: A printing company estimates that it will require 1,000 reams of a certain type of paper in a given period. The cost of carrying one unit in inventory for that period is 50 cents. The company buys the paper from a wholesaler in the same town, sending its own truck to pick up the orders at a fixed cost of $20.00 per trip. Treating this cost as the order cost, (a) what is the optimum number of reams to buy at one time? (b) How many times should lots of this size be bought during this period? (c) What is the minimum cost (holding and setup) of maintaining inventory on this item for the period? (d) Of this total cost, how much is carrying cost and how much is ordering cost?

Q: Distribution is essential for tangible goods, but not for intangible goods. a. True b. False