Q&A Hero

Q: A risk avoider would want ______ safety stock. A. less B. more C. the same D. zero E. 50 percent

Q: A cycle count program will usually require that A items be counted: A. daily. B. once a week. C. monthly. D. quarterly. E. more often than annually.

Q: In a supermarket, a vendor's restocking the shelves every Monday morning is an example of: A. safety stock replenishment. B. economic order quantities. C. reorder points. D. fixed order intervals. E. blanket ordering.

Q: Which is not a true assumption in the EOQ model? A. Production rate is constant. B. Lead time does not vary. C. No more than three items are involved. D. Usage rate is constant. E. No quantity discounts.

Q: 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

Q: 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 quantities. D. reduce theft. E. count 10 percent of the items each month.

Q: 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. B. B items. C. C items. D. A items plus B items. E. B items plus C items.

Q: 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: A. A items. B. B items. C. C items. D. A items plus B items. E. B items plus C items.

Q: In an A-B-C system, the typical percentage of the number of items in inventory for A items is about: A. 10. B. 30. C. 50. D. 70. E. 90.

Q: Which of the following is least likely to be included in order costs? A. processing vendor invoices for payment B. processing purchase order C. inspecting incoming goods for quantity D. taking an inventory to determine how much is needed E. temporary storage of delivered goods

Q: 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.

Q: When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves: A. line up. B. equal zero. C. do not line up. D. cannot be calculated. E. depend on the percentage assigned.

Q: In a two-bin inventory system, the amount contained in the second bin is equal to the: A. ROP. B. EOQ. C. amount in the first bin. D. optimum stocking level. E. safety stock.

Q: A nonlinear cost related to order size is the cost of: A. interest. B. insurance. C. taxes. D. receiving. E. space.

Q: Which of the following interactions with vendors would potentially lead to inventory reductions? A. reduced lead times B. increased safety stock C. less frequent purchases D. larger batch quantities E. longer order intervals

Q: 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. Ordering and holding costs have been estimated reasonably accurately.

Q: 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 is 97.5 percent. Assume that it is now time to place another order, and there are 43 units on hand. How many units should be ordered? A. 120 B. 93 C. 136 D. 46 E. 84

Q: 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 (on average) will this item be ordered? A. once a month B. once every other month C. twice a month D. twice every three months E. three times every two months

Q: If there are shipping cost economies that result from bundling orders for different items together, the __________ model becomes a relatively more attractive option. A. multi-period B. reorder-point C. fixed-order-quantity D. fixed-order-interval E. multi-item

Q: Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances. A. foreorder costs B. service costs C. shortage costs D. holding costs E. setup costs

Q: Which of the following is typically the largest of all inventory costs? A. shortage cost B. purchase cost C. holding cost D. ordering cost E. pipeline cost

Q: A stock or store of goods is called a(n): A. bundler. B. servicer. C. retailer. D. supply chain. E. inventory.

Q: Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.

Q: Cycle counting can be used in motorcycle inventory control.

Q: The two basic issues in inventory are how much to order and when to order.

Q: The calculation of safety stock requires knowledge of demand and lead time variability.

Q: Safety stock eliminates all stockouts.

Q: It is critical that the exact quantity calculated in the EOQ model be ordered.

Q: A quantity discount will lower the reorder point.

Q: In the single-period model, the service level is the probability that demand will not exceed the stocking level in any period.

Q: When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill.

Q: The basic EOQ model ignores the purchasing cost.

Q: A single-period model would be used mainly by organizations going out of business.

Q: Monitoring inventory turns over time can be used as a measure of performance.

Q: The single-period model can be very helpful in determining how much to order.

Q: The single-period model can be very helpful in determining when to order.

Q: The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.

Q: Discrete stocking levels are used when an organization does not want visibility of inventory levels.

Q: The fixed-order-interval model requires a continuous monitoring of inventory levels.

Q: In the fixed-order-interval model, the order size is the same for each order.

Q: Profit margins tend to be inversely related to inventory turns.

Q: ROP models assume that demand during lead time is composed of a series of dependent daily demands.

Q: Solving quality problems can lead to lower inventory levels.

Q: Variability in demand and/or lead time can be compensated for by safety stock.

Q: Safety stock is held because we anticipate future demand.

Q: The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory.

Q: The rate of demand is an important factor in determining the ROP.

Q: When to order can be calculated by the ROP and expressed as a quantity.

Q: ROP models indicate to managers the time between orders.

Q: In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

Q: 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.

Q: Because price is not a factor in the EOQ formula, quantity discounts will not affect EOQ calculations.

Q: The total cost curve is relatively flat near the EOQ.

Q: Annual ordering cost is inversely related to order size.

Q: Understocking an inventory item is a sure sign of inadequate inventory control.

Q: Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost.

Q: The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.

Q: The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.

Q: The average inventory level is inversely related to order size.

Q: EOQ inventory models are basically concerned with the timing of orders.

Q: 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.

Q: An inventory buffer adds value and lowers cost in all supply chains.

Q: 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.

Q: Interest, insurance, and opportunity costs are all associated with holding costs.

Q: Decoupling operations applies to the railroad industry.

Q: An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.

Q: Reorder point models are primarily used for dependent-demand items.

Q: DVD recorders would be an example of independent-demand items.

Q: In the EOQ formula, holding costs under 10 percent are expressed as percentages, above 10 percent are expressed as annual unit costs.

Q: 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 the size of orders.

Q: The two main concerns of inventory control relate to the costs and the level of customer service.

Q: The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

Q: A retail store that carries twice as much inventory as its competitor will provide twice the customer service level.

Q: The objective of inventory management is to minimize the cost of holding inventory.

Q: One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.

Q: ERP began in manufacturing organizations but has spread into service organizations.

Q: Load reports show capacity requirements for departments or work centers which may be more or less than the capacity available in that work center.

Q: In MRP, EOQ models tend to be less useful for materials at the lowest levels than for upper-level assemblies of the bill of materials since higher-level assemblies have larger dollar investments.

Q: MRP output reports are divided into two main groups, daily and weekly.

Q: Lot-for-lot ordering in MRP provides coverage for some predetermined number of periods (such as two or three) that extend beyond the orders already received for those periods.