Q&A Hero

Q: The Corner Newsstand has demand for a certain weekly magazine that can be approximated by a Poisson distribution with a mean of 9.0. Magazines are purchased for $1.50. If unsold copies must be destroyed and copies sell for $4.00 each, find the optimum stocking level.

Q: The Corner Newsstand has demand for a certain weekly magazine that can be approximated by a Poisson distribution with a mean of 9.0. Magazines are purchased for $1.50. If unsold copies can be returned for half credit and the owner stocks 10 copies, what is the implied range of shortage cost?

Q: 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?

Q: A machine is expected to use approximately three spare parts during its useful life. The spares cost $200 each and have no salvage value or other use. The manager has ordered five spares. Assuming a Poisson usage rate, what range of shortage cost is implied? Ce = $200 Mean = 3 (Poisson) Cs = ?

Q: 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?

Q: Joe's Coffee Shoppe has fresh doughnuts delivered each morning. Daily demand for plain doughnuts is approximately normal, with a mean of 200 and a standard deviation of 15. Joe pays $1.20 per dozen and has a standing order for 16 dozen. Joe and the staff eat any leftovers. What is the implied shortage cost?

Q: 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?

Q: Given the following data for a particular inventory item: For the economic order quantity, what are average weekly total costs, including the cost of the inventory item?

Q: Given the following data for a particular inventory item: What is the economic order quantity for this item?

Q: 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.

Q: 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?

Q: A shop owner uses a reorder point approach to restocking a certain raw material. Lead time is six days. Usage of the material during lead time is normally distributed with a mean of 42 pounds and a standard deviation of four pounds. When should the raw material be reordered if the acceptable risk of a stockout is 3 percent?

Q: 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?

Q: A company can produce a part it uses in an assembly operation at the rate of 50 an hour. The company operates eight hours a day, 300 days a year. Daily usage of the part is 300 parts. The company uses the part every day. The run size is 6,000 parts. The annual holding cost is $2 per unit, and setup cost is $100. (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.

Q: Given the following information:

Q: A bakery's use of corn sweetener is normally distributed with a mean of 80 gallons per day and a standard deviation of four gallons per day. Lead time for delivery of the corn sweetener is normal, with a mean of six days and a standard deviation of two days. If the manager wants a service level of 99 percent, what reorder point should be used?

Q: 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.

Q: A dry cleaning firm uses an average of 20 gallons of cleaning fluid a day. Usage tends to be normally distributed with a standard deviation of two gallons per day. Lead time is four days, and the desired service level is 92 percent. What amount of safety stock is appropriate if a fixed order size of 600 gallons is used? = 15 gallons per day; = 2 gallons per day LT = 8 days SL = 7/8 = 87.5 percent (Z = 1.15)

Q: The operator of a concession at a downtown location estimates that he will sell 400 bags of circus peanuts during a year. 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?

Q: Suppose that you are the manager of a production department that uses 400 boxes of rivets per year. The supplier quotes you a price of $8.50 per box for an order size of 199 boxes or less, a price of $8.00 per box for orders of 200 to 999 boxes, and a price of $7.50 per box for an order of 1,000 or more boxes. You assign a holding cost of 20 percent of the price to this inventory. What order quantity would you use if the objective is to minimize total annual costs of holding, purchasing, and ordering? Assume ordering cost is $80/order.

Q: Estimated demand for gold-filled lockets at Sam's Bargain Jewelry and Housewares is 2,420 lockets a year. Manager Veronica Winters has indicated that ordering cost is $45, and that the following price schedule applies: 1 to 599 lockets, $.90 each; 600 to 1,199 lockets, $.80 each; and 1,200 or more, $.75 each. What order size will minimize total cost if carrying cost is $.18 per locket on an annual basis?

Q: 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

Q: A service garage uses 120 boxes of cleaning cloths a year. The boxes cost $6 each. Ordering cost is $3 and holding cost is 10 percent of purchase cost per unit on an annual basis. Determine: (A) the economic order quantity (B) the total cost of carrying the cloths (excluding purchase price) (C) the average inventory

Q: 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 $.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

Q: The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. What is the economic order quantity for resin? A. 50 kilograms B. 100 kilograms C. 250 kilograms D. 500 kilograms E. 1,000 kilograms

Q: The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If the order size was 1,000 kilograms of resin, what would be the daily total inventory costs, EXCLUDING the cost of the resin? A. $5 B. $10 C. $20 D. $25 E. $40

Q: The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If the order size was 1,000 kilograms of resin, what would be the average inventory level? A. 50 kilograms B. 200 kilograms C. 500 kilograms D. 800 kilograms E. 1,000 kilograms

Q: The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If order size was 1,000 kilograms of resin, what would be the length of an order cycle? A. .05 days B. 4 days C. 16 days D. 20 days E. 50 days

Q: The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. At what point should resin be reordered? A. 0 kilograms remaining B. 50 kilograms remaining C. 200 kilograms remaining D. 400 kilograms remaining E. 500 kilograms remaining

Q: The 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. What is the economic order quantity? A. 600 bills B. 3,000 bills C. 949 bills D. 6,215 bills E. 12,500 bills

Q: The 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. 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? A. $625 B. $1,250 C. $2,500 D. $3,125 E. $37,500

Q: The 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. If she were to order 6,000 bills at a time, what would be the dollar value of the average inventory level? A. $3,000 B. $6,000 C. $12,500 D. $300,000 E. $600,000

Q: The 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. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the length of an order cycle? A. .48 days B. 2.08 days C. 6 days D. 8.4 days E. 14.4 days

Q: The 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. Assuming a 30-day month, at what point should bills be reordered? A. 0 bills remaining B. 417 bills remaining C. 2,500 bills remaining D. 10,000 bills remaining E. 12,500 bills remaining

Q: Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. What is the economic order quantity for pepperoni? A. 20 pounds B. 40 pounds C. 60 pounds D. 80 pounds E. 100 pounds

Q: Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the total daily costs, including the cost of the pepperoni? A. $60.00 B. $63.20 C. $64.00 D. $64.10 E. $65.00

Q: Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the average inventory level? A. 20 pounds B. 40 pounds C. 60 pounds D. 80 pounds E. 100 pounds

Q: Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the length of an order cycle? A. 0 days B. 0.25 days C. 3 days D. 4 days E. 5 days

Q: Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. At what point should she reorder pepperoni? A. 20 pounds remaining B. 40 pounds remaining C. 60 pounds remaining D. 80 pounds remaining E. 100 pounds remaining

Q: The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. What is the economic order quantity for Stein beer? A. 8 cases B. 11 cases C. 14 cases D. 20 cases E. 32 cases

Q: The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the daily total inventory costs, EXCLUDING the cost of the beer? A. $2.00 B. $4.00 C. $1.28 D. $3.28 E. $2.56

Q: The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the average inventory level? A. 4 cases B. 12 cases C. 8 cases D. 20 cases E. 16 cases

Q: The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the length of an order cycle? A. .25 days B. 3 days C. 1 day D. 4 days E. 20 days

Q: The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. At what point should he reorder Stein beer? A. 0 cases remaining B. 4 cases remaining C. 12 cases remaining D. 16 cases remaining E. 20 cases remaining

Q: 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. Compared to the EOQ, the maximum inventory would be approximately: A. 70 percent higher. B. 30 percent higher. C. the same. D. 30 percent lower. E. 70 percent lower.

Q: 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. Compared to the EOQ, the economic production quantity would be approximately: A. the same. B. 20 percent larger. C. 40 percent larger. D. 20 percent smaller. E. 40 percent smaller.

Q: 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

Q: 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

Q: 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. Demand is highly variable

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

Q: 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: A. 20. B. 50. C. 70. D. 80. E. 130.

Q: 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.

Q: 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.

Q: Cycle stock inventory is intended to deal with: A. excess costs. B. shortage costs. C. stockouts. D. expected demand. E. quantity discounts.

Q: An operations strategy for inventory management should work toward: A. increasing lot sizes. B. decreasing lot sizes. C. increasing safety stocks. D. decreasing service levels. E. increasing order quantities.

Q: The management of supply chain inventories focuses on: A. internal inventories. B. external inventories. C. both internal and external inventories. D. safety stock elimination. E. optimizing reorder points.

Q: 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? A. .5 B. .6 C. .7 D. .8 E. .9

Q: 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?

Q: In the single-period model, if excess cost is double the shortage cost, the approximate stockout risk, assuming an optimum service level, is ___ percent. A. 100 B. 67 C. 50 D. 33 E. 5

Q: In a single-period model, if shortage cost is four times excess cost, then the optimum service level is ___ percent. A. 100 B. 80 C. 60 D. 40 E. 20

Q: In a single-period model, if shortage and excess costs are equal, then the optimum service level is: A. 0. B. .33. C. .50. D. .67. E. .75.

Q: Which of these products would be most apt to involve the use of a single-period model? A. gold coins B. hammers C. fresh fish D. calculators E. frozen corn

Q: 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.

Q: A. 20 times 2 B. 20 times 10 C. 2 times the square root of 20 D. 2 times the square root of 10 E. 400 times the square root of 10

Q: A. 60 times 2 B. 60 times the square root of 2 C. 60 times the square root of 10 D. 60 times 10 E. 10 times the square root of 2

Q: 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 that demand will exceed supply during lead time. C. The probability is .95 that demand will equal supply during lead time. D. The probability is .95 that demand will not exceed supply during lead time. E. Approximately 95 percent of all demand will actually be satisfied directly from on-hand inventory.

Q: 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 that demand during lead time will exactly equal the amount on hand at the beginning of lead time. D. The probability is .95 that demand during lead time will not exceed the amount on hand at the beginning of lead time. E. The probability is .95 that the order will arrive after the on-hand inventory is exhausted.

Q: 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: A. 100 units. B. 200 units. C. 300 units. D. 600 units. E. 700 units.

Q: 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.

Q: 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

Q: 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: A. have the lowest total cost. B. be in a feasible range. C. be to the left of the price break quantity for that price. D. have the largest quantity compared to other EOQs. E. have smaller ordering costs than the others.

Q: A fill rate is the percentage of _____ filled by stock on hand. A. shipments B. demand C. inventory D. safety stock E. lead time

Q: The introduction of quantity discounts will cause the optimum order quantity to be: A. smaller. B. unchanged. C. greater. D. smaller or unchanged. E. unchanged or greater.

Q: 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 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

Q: Which of the following is not true for the 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.

Q: In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately: A. 11. B. 20. C. 24. D. 28. E. 375.

Q: In the basic EOQ model, if D = 60 per month, S = $12, and H = $10 per unit per month, EOQ is: A. 10. B. 12. C. 24. D. 72. E. 144.

Q: 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. B. square root of 200. C. 200. D. 400. E. 600.

Q: 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 2. D. remain the same. E. increase, but more information is needed to calculate exactly how much.

Q: In the basic EOQ model, if annual demand doubles, the effect on the EOQ is: A. It doubles. 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.