Chapter 11

backorder

A ___________ is when the order is held and filled later when the inventory for the item is replenished.

quantity

A fixed-order ___________ model uses a reorder point, R, to trigger an order of an optimal amount of product, labeled Q.

True

A fixed-order quantity model is triggered by inventory dropping to a specified level. True false question.

selling, quantity

A price-break model suggests that the ___________ price of an item varies with order ___________.

B

Acme Company carries an additional level of inventory beyond the expected demand during reorder lead times. This additional inventory is known as Multiple choice question. A. backorder stock. B. safety stock. C. raw material. D. just-in-case supplies.

D

Acme Company carries an additional level of inventory beyond the expected demand during reorder lead times. This additional inventory is known as Multiple choice question. A. raw material. B. backorder stock. C. just-in-case supplies. D. safety stock.

inventory system

An ______________ is the set of policies and controls that monitor levels of inventory and determine what levels should be maintained, when it should be replenished, and how large orders should be.

Demand (D) * Cost per unit

Annual purchase cost =

A

Because of favorable pricing in the short-term, a company is looking at ordering a larger-than-needed optimal quantity of an item, and keeping the excess in inventory. Which model is the company likely using to arrive at this decision? Multiple choice question. A. Price break B. Inventory turns C. Time-period D. Cycle count

demand, lead

Calculation of the reorder point for a fixed-quantity model with safety stock requires that one know the average daily ____________ and the ________ time.

D

Campbell's Soup makes products for Kroger and other grocery stores based on sales to the final consumer. This inventory management environment is characterized as ________ demand. A. forecasted B. marketing C. dependent D. independent

A, B, C

Computer cycle counting programs can produce a cycle count notice after which events? Multiple select question. A. A zero balance on-hand B. A specified level of activity C. A positive balance but a backorder was created D. When raw material prices drop

external, products

Demand is termed as independent if it comes from sources ____________ to the firm and is not related to other ______________. (Enter only one word per blank.)

C

Fixed-time period is an inventory control method where firms place orders periodically, but the order quantity is ___________ every time. Multiple choice question. A. determined by stock prices B. the same C. different D. determined by wholesale prices

A, B, C items

From highest percentage to lowest percentage, rank the ABC categories in terms of value of items in inventory:

storage, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, opportunity cost of capital

Holding costs include costs associated with ________, ____________, ________, ______, _________, ______________, _____________, ______________, and _______________.

independence

If manufacturing equipment within a facility produces at different rates, one can use inventory to maintain _____________ of operations. (Enter only one word per blank.)

lead

In a fixed-time period inventory model, the average demand over the vulnerable period depends on the review cycle (T) and the constant ____________ time (L).

D

In constructing any inventory model, there has to be a functional relationship between the Multiple choice question. A. order cycle time and transportation costs. B. average product costs and average daily lead time. C. annual demand and lead time in days. D. variable of interest and the measure of effectiveness.

in-transit, warehouse

In distribution, inventory is classified as ____________, meaning that it is being moved in the system. It is classified as ___________ if the inventory is in the warehouse or distribution center.

35

In the ABC approach, B items account for approximately ______% of the items in inventory.

D

Inventory turn is a key measure for a business and directly relates to Multiple choice question. A. the price paid for raw materials. B. the supply chain manager's performance. C. the quality of management. D. the financial performance of the firm.

C

Inventory turn is a key measure for a business and directly relates to Multiple choice question. A. the supply chain manager's performance. B. the quality of management. C. the financial performance of the firm. D. the price paid for raw materials.

raw materials, finished products, component parts, supplies, work-in-process

Manufacturing inventory is typically classified into _________, _________, __________, __________, and ___________.

C

Match the inventory cost with their definition: Holding costs A. Costs incurred when a product is not available when ordered by a customer. B. Costs associated with placing an order with a supplier. C. Costs of storage, loss, handling, insurance, obsolescence. D. Costs associated with initiating production of a product.

B

Match the inventory cost with their definition: Ordering costs A. Costs incurred when a product is not available when ordered by a customer. B. Costs associated with placing an order with a supplier. C. Costs of storage, loss, handling, insurance, obsolescence. D. Costs associated with initiating production of a product.

D

Match the inventory cost with their definition: Setup costs A. Costs incurred when a product is not available when ordered by a customer. B. Costs associated with placing an order with a supplier. C. Costs of storage, loss, handling, insurance, obsolescence. D. Costs associated with initiating production of a product.

A

Match the inventory cost with their definition: Shortage costs. A. Costs incurred when a product is not available when ordered by a customer. B. Costs associated with placing an order with a supplier. C. Costs of storage, loss, handling, insurance, obsolescence. D. Costs associated with initiating production of a product.

30, 35

The average cost of inventory in the united states is _____ to ______ percent of its value.

when, how large

The basic purpose of inventory analysis, whether in manufacturing, distribution, retail, or services is to specify these questions about orders: 1. __________ 2. __________

obsolescence, insurance, opportunity costs

The cost of inventory largely comes from __________, __________, and _____________.

dependent, independent

The number of tires need is a ________ demand on the production levels and is not derived separately from the ___________ demand for the car the tires are hosted on

C

The sum of annual purchasing costs, annual ordering costs, and annual holding costs is known as the Multiple choice question. A. total order cost. B. annual product cost. C. total annual cost. D. total inventory cost.

lead time

The time between placing an order and receiving the item(s) is called the

A

The time between placing an order and receiving the item(s) is called the Multiple choice question. A. lead time. B. reorder point. C. cycle count. D. demand variation.

fixed-order quantity model, fixed-time period models

There are two types of multiperiod inventory systems: ______________________ (also called the economic order quantity, EOQ, and Q-model) and ___________________ (also referred to as the periodic system, periodic review system, fixed-order interval system, or P-model)

True

True or false: When a vendor makes routine visits to a firm to take orders, a fixed-time period model may be a good choice.

C, A

Typically, when using ABC classification, the low dollar value, or measure of importance, items are in group ______________, while high dollar value items are in group ____________.

inventory

When calculating the order quantity in a fixed-time period model with safety stock, the formula is Order Quantity = Average demand over the vulnerable period + safety stock - ___________ currently on-hand.

A

When calculating the reorder point for a fixed-quantity model with safety stock, the value "z" represents Multiple choice question. A. the number of standard deviations associated with a given service probability. B. the standard deviation of demand during the lead time. C. the expected number of stock outs each period. D. the average daily demand.

stockout

When demand is not met and an order is cancelled, it is referred to as a __________

A

When placing an order for a single period, the order quantity should be increased as long as Multiple choice question. A. the probability of selling what is ordered is less than or equal to Cu/(Cu+Co) B. the probability of selling what is ordered is greater than Cu/(Cu+Co) the probability of selling what C. is ordered is less than or equal to Cu/(Cu-Co)

B, C

When placing an order for a single period, which of the following is considered? Multiple select question. A. The cost of placing an order B. The cost of underestimating demand C. The cost of overestimating demand D. The cost of transportation

A

Which category of inventory is managed most closely by the firm? Multiple choice question. A. C items B. No items C. A items D. All items are managed the same

A

Which choice best explains this advantage of inventory: Accommodate variability in raw material delivery time A. Provide a buffer to absorb unexpected shortages or disruptions from vendors B. Order larger quantities to reduce shipping, receiving, and clerical costs. C. Allow the work center flexibility to work without undue influences from other work centers. D. Acts as a buffer to absorb unexpected periods of high demand.

C

Which choice best explains this advantage of inventory: Maintain independence of operations A. Provide a buffer to absorb unexpected shortages or disruptions from vendors B. Order larger quantities to reduce shipping, receiving, and clerical costs. C. Allow the work center flexibility to work without undue influences from other work centers. D. Acts as a buffer to absorb unexpected periods of high demand.

D

Which choice best explains this advantage of inventory: Meet variation in product demand A. Provide a buffer to absorb unexpected shortages or disruptions from vendors B. Order larger quantities to reduce shipping, receiving, and clerical costs. C. Allow the work center flexibility to work without undue influences from other work centers. D. Acts as a buffer to absorb unexpected periods of high demand.

B

Which choice best explains this advantage of inventory: Take advantage of economic purchase order size A. Provide a buffer to absorb unexpected shortages or disruptions from vendors B. Order larger quantities to reduce shipping, receiving, and clerical costs. C. Allow the work center flexibility to work without undue influences from other work centers. D. Acts as a buffer to absorb unexpected periods of high demand.

A, C, D

Which of the following is a form of inventory? Multiple select question. A. Finished products held in a warehouse B. Money owed to a firm by its customers C. Parts waiting to be assembled D. Raw material held in a warehouse

B

Which of the following is also called a periodic review system? Multiple choice question. A. Perpetual B. Fixed-time period C. Fixed-order quantity D. Single-period

B, C

Which of the following is influenced by the customer order decoupling point? Select all that apply: A. Quality system B. Lead time C. Inventory investment D. Supplier base

D

Which of the following is not a cost associated with inventory management? Multiple choice question. A. Set up costs B. Holding costs C. Shortage costs D. Transportation costs

C

Which of the following is the correct total annual cost equation? A. TC= DC + (D/2)*S + (Q/2)*H B. DC= TC + (D/2)*S + (Q/2)*H C. TC= DC + (D/Q)*S+ (Q/2)*H D. TC= DC + (S/2)*D + (Q/2)*H

Setup, production change

________ (or ______________) cost: the cost of obtaining materials, equipment, paperwork, charging time and materials, moving out previous units of stock

single-period

________ model is used when we are making a one-time purchase of any item.

Fixed-order quantity

________ model is used when we want to maintain an item "in stock," and when we resupply the item, a certain number of units must be ordered each time.

manufacturing inventory

___________ generally, refers to items that contribute to or become part of a firm's product output.

holding, carrying

____________ ( or ____________) costs: this category includes the costs of storage, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and opportunity cost of capital.

Fixed-time period

_____________ model is used when the item should be in stock and ready to use.

shortage

_______________ costs: When the stock of an item is depleted, an order for that item must either wait until the stock is replenished or be cancelled.

inventory

_______________ turn is the ratio of costs of goods sold to average inventory value.

order

________________ costs: these costs refer to managerial and clerical costs to prepare the purchase or production order.

inventory

________________ is the stock of any item or resource used in an organization.

total annual cost

__________________ = annual purchase cost + annual ordering cost + annual holding cost

inventory position

_______________________ =on-hand + on-order - backorder

cycle counting

__________________________ is a physical inventory-taking technique in which inventory is counted frequently, often times on a time-based schedule.

Quantity * Holding cost / 2

annual order cost=

Demand (D) * Setup cost / Quantity

annual ordering costs=