Chapter 12 Operations Management - Inventory Management, Operations Management Module D, Operations Management Chapter 11 Supply Chain Management inventory management
If annual demand is 48000 units, orders are placed in quantities of 2000 units at a time, and the cost to place an order is $80, what is the annual ordering cost
(48000/2000)*80 =$1920
For the basic EOQ model, what is the formula for the total annual cost
(D/Q)S+(Q/2)H
In a periodic review inventory system, how many units are ordered?
Target inventory level- on hand balance
Which of the following is most likely to violate a FIFO queue? A. supermarket with no express lanes B. emergency room C. fast-food restaurant D. car repair garage E. All of the above are equally likely to violate a FIFO queue.
emergency room
The source population is considered to be either __________ in its size. A. small or large B. known or unknown C. finite or infinite D. random or scheduled E. fixed or variable
finite or infinite
17. Companies can achieve cost efficient operations by using which of the following inventory approaches
inventory building to leverage reduced setup costs
The shopper who says to himself, "I've waited too long in this line. I don't really need to buy this product today," and leaves the store is an illustration of which element of arrival behavior? A. random departure B. random arrival C. balk D. renege E. None of the above.
renege
Under a periodic review system, enough inventory must be carried to protect against stockout for the ___________
replenishment lead time plus the review period
All of the following affect holding costs except
setup cost
Which of the following is NOT an identified reason why manufacturing firms do not use optimal EOQ order quanities
what the sales price is
13. In inventory management, when discussing customer service we mean:
whether the product is available when the customer wants it
In the service industry it is considered good performance when a company has an inventory loss of only
1%
Keiretsu
A Japanese term that describes suppliers who become part of a company coalition.
Arrivals or inputs to a waiting-line system have characteristics that include A. population's statistical distribution. B. population behavior. C. population size. D. Both A and C. E. A, B, and C.
A B and C
If the annual demand is 24000 units, orders are placed every .5 months, and the cost to place an orders if $50, what is the annual ordering cost?
24x$50 =$1200
If a company carries 13 weeks of supply, what is the inventory turnover?
52 weeks/13 weeks =4
For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15000 units. The following price schedule applies to the firm's purchases. What is the optimal order quantity
812
Make-Or-Buy Decision
A choice between producing a component or service in-house or purchasing it from an outside source.
Which of the following represents a customer that reneged due to the waiting line? A. A car drives past the first fast-food restaurant on Hamburger Row because the drive-through was full. B. A student ordered pizza online because the phone line was busy. C. A Black Friday shopper skipped one store because the line went around the building. D. A husband and wife decide to eat out instead after seeing the movie ticket line. E. A customer at a gas station went inside to buy a soda, but after waiting in line for a minute left the soda behind and went outside empty-handed.
A customer at a gas station went inside to buy a soda, but after waiting in line for a minute left the soda behind and went outside empty-handed.
12. Which of the following allow you to calculate the average amount of the inventory in transit
ATI = (tD)/365
Mary's Flower Boutique needs to ship finished goods from its manufacturing facility to its distribution warehouse. Annual demand for the Flower Boutique is 2000 flowers. Flower Boutique can ship the flowers via regular parcel service (3 days transit time), premium parcel service (1 day transit time), or via public carrier (5 days transit time). What is the average annual transportation inventory for each alternative
ATI(regular service)= 3(2400)/365=19.7 ATI(premium)=1(2400)/365=6.6 ATI(public service)=5(2400)/365=32.9
What is the formula for calculating the average transportation inventory (ATI)
ATI= tD/365
Which of the following is a measure of queue performance? A. average waiting time in the line B. average queue length C. utilization factor D. probability of a specific number of customers in the system E. All of the above.
All of the above
Which part of a waiting line has characteristics that involve statistical distribution? A. arrivals or inputs B. waiting line itself C. service facility D. Both A and C. E. A, B, and C.
Both A and C
Vertical Integration
Developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.
In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks
EOW/average weekly demand
What is the formula for calculating the max inventory level
Imax=Q(1-d/p)
75. Which of the following is not one of the six ways to use inventory
JIT iventory
8. Which of the following inventory functions does not involve end products sold to customers
MRO inventory
Hand tools, lubricants, and cleaning supplies are usually examples of what?
MRO inventory
What implies that about 20% of the inventory items will account for about 80% of the inventory value?
Pareto's law
Consider a periodic review inventory with a lead time of two weeks and a review period of seven weeks. If the standard deviation of weekly demand is 200 and the desired cycle service level is 86%, what should the safety stock equal
R=dL+SS 648
The formula for calculating safety stock when an estimate of demand during lead time and its standard deviation are known as
SS+z*meandl
Consider the periodic system. The target inventory level is 1000 units. It is time to review the item, and the on hand inventory level is 200 units. How many units should be ordered?
TI=d(RP+L)+SS 800
Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be?
TI=d(RP+L)+SS 9300
Outsourcing
Transferring a firm's activities that have traditionally been internal to external suppliers.
the inventory objective of customer service is measured by any of the following EXCEPT
weeks of supply
What does WIP stand for
Work in Process
A university has only one technician in the repair station to care for the computers in the student labs. This system is most likely A. a single channel, limited queue system. B. a multi-channel, limited queue system. C. a multi-channel, limited population system. D. a single channel, limited population system. E. None of the above.
a single channel, limited population system
Study of waiting-line models helps operations managers better understand A. maintenance activities that might repair broken machinery. B. shopminus floor control activities. C. service systems such as amusement park rides. D. service systems such as bank teller stations. E. All of the above.
all of the above
14. Percentage of orders shipped on schedule is a good measure of finished goods customers service if:
all orders and customers have similar value
16. What is the formula for inventory turnover?
annual COGS/average inventory in dollars
The ranking in ABC inventory analysis is based on what?
annual dollar usage
If the EOQ is ordered, which of the following is true
annual ordering cost is equal to annual holding cost
What costs are considered in the basic EOQ model
annual ordering costs+annual holding costs
what costs are considered in the quantity discount model
annual purchasing costs+ annual holding costs+ annual ordering costs
5. Which inventory function specifically is designed to allow the company to maintain a level of production strategy
anticipation inventory
9. Which is the primary inventory function that is activated after coupons are distributed to customers?
anticipation inventory
A waiting line, or queuing, system has three parts, which are A. arrival discipline, queue discipline, and service sequencing. B. arrival or inputs, queue discipline or the waiting line itself, and the service facility. C. arrival rate, service rate, and utilization rate. D. sequencing policy, penalty for reneging, and expediting of arrivals. E. distribution of arrival times, discipline while waiting, and distribution of service times.
arrival or inputs, queue discipline or the waiting line itself, and the service facility.
The common measures of a queuing system's performance include A. average time each customer spends in the system, maximum queue length, probability of a specific number of customers in the system. B. average time each customer spends in the system, probability that the service system will be idle, average time each customer spends in the queue. C. probability that the service facility will be idle, average queue length, probability that the waiting time will exceed a specified duration. D. average queue length, maximum time a customer may spend in the queue, the utilization factor for the system. E. None of the above.
average time each customer spends in the system, probability that the service system will be idle, average time each customer spends in the queue.
The potential restaurant customer who says to her husband, "The line looks too long; let's eat somewhere else," is an illustration of which element of queue discipline? A. random departure B. renege C. balk D. first-in, first-out E. None of the above.
balk
if the costs (S and H) and demands (D) are the same, which of the following is NOT true with regard to the EPQ model as compared to the EOQ model
both models use the same formula to compute annual holding cost
How can both the JIT and EOQ inventory theories effectively be reconciled
by considering the setup cost as a variable instead of a parameter
What does EPQ stand for
economic production quantity
22. If inventory records fail to accurately reflect the quantity of materials available, all except which of the following may occur
continuous operations
What are two logical ways in which to base the time between orders in a periodic review system
convenience or EOQ calculations
48. How can the EPQ model be economically reconciled with just in time production
decrease ordering cost
in the two bin system, what does the quantity in the second bin represent
demand during replenishment lead time
Which of the following is an assumption of the basic EOQ model
demand is known and constant
Which of the following is NOT affected by decisions about how much inventory to hold?
depreciation
4. Finished goods in transit to the customer are called what?
distribution inventory
Consider the basic EOQ model. If annual demand doubles, what happens to the total annual setup and holding cost?
it increases by 41.42%
Which of the following is an assumption of the basic EOQ model
lead time is known and constant
Which inventory function helps firms garner quantity discounts
lot size inventory
Supply Chain Management
management of activities that procure materials and services, transform them into intermediate goods and final products, and deliver them through a distribution system
The sign at the bank that reads "Wait here for the first available teller" suggests the use of a __________ waiting line system. A. multiple line B. multi-channel C. single channel D. random-channel E. dynamic-channel
multi channel
An airline ticket counter, with several agents for one line of customers, is an example of a A. multi-channel, multi-phase system. B. multi-channel, single phase system. C. single channel, multi-phase system. D. single channel, single phase system. E. None of the above.
multi channel single phase
A college registrar's office requires you to first visit with one of three advisors and then with one of two financial professionals. This system is best described as A. single channel, single phase system. B. single channel, multi-phase system. C. multi-channel, multi-phase system. D. multi-channel, single phase system. E. multi-channel, cross-phase system.
multi channel, multi phase
In queuing problems, which of the following probability distributions is typically used to describe the time to perform the service? A. binomial B. lognormal C. negative exponential D. Poisson E. normal
negative exponential
15. Percentage of line items shipped on schedule recognizes that:
not all orders are equal but fails to take into acct the dollar values of orders
ABC inventory assumes that a company's inventory is ____ equal and ______ the same level of ________
not, does not need, control
______________ is the probability that demand during lead time will NOT exceed on hand inventory
order cycle service level
Which basic EOQ assumption does the EPQ model relax
orders arrive at once
Which of the following is an assumption of the basic EOQ model
orders arrive at once (in one lot)
Which of the following is not a common queuing situation? A. patients in a health clinic waiting to see one of several doctors B. machinery waiting to be repaired or maintained C. commuters slowing or stopping at toll plazas to pay highway tolls D. parcel delivery truck following its computer-generated route E. grocery shoppers being served by checkout clerks
parcel delivery truck following its computer-generated route
63. Which of the following statement is true
periodic counting generally counts every item in stock, whereas annually cycle counting generally does not daily
A (an) _________ inventory record provides an up to date inventory balance by recording all inventory transactions as they happen
perptual
In queuing problems, which of the following probability distributions is typically used to describe the number of arrivals per unit of time? A. normal B. Poisson C. lognormal D. exponential E. binomial
poisson
Women and children first!" declares the captain of a sinking ship. His directive employs which of the following queue disciplines in disembarking passengers? A. random B. priority C. FIFO or FIFS D. LIFO or LIFS E. SPT
priority
Which of the following is an assumption of the basic EOQ model
quantity discounts are not considered
What are purchased items or extracted materials that will be transformed into components or products called
raw materials inventory
If the food service for the university operates a cafeteria with a single serving line, that system behaves most like a A. multi-channel, multi-phase system. B. single channel, single phase system. C. single channel, multi-phase system. D. multi-channel, single phase system. E. None of the above.
single channel, multi phase
a SKU is a ___________________ at a ____________________ geographic location
specific item, particular
10. Which inventory function provides a hedge against inflation
speculative inventory
6. Which inventory function provides a cushion against unexpected supply shortage?
speculative inventory
if the EOQ is ordered, which of the following represents the total annual cost of ordering the holding
square root (2DSH)
A computer company has an annual demand of 20,000. They want to determine EOQ for circuit boards which have an annual holding cost of $10/unit, and an ordering cost(S) of $75. The purchasing lead time is 5 days. What is the TC and the reorder point (R)?
square root of 2(20,000)(75)/10=548 R=20,000/250 daysx 5 days= 400 units TC=(20000/548x75)+(548/2x10)= $5477 400 units, $5477
For the basic EOQ model, how many units should be ordered each time an order is placed
square root(2DS/H)
Which of the following is used in determining the order quantity in the periodic review system
target inventory level
If the costs (S and H) and demands (D) are the same, which of the follwoing is not true with regard to the EPQ model as compared to the EOQ model?
the inventory depletion rate is not the same for both models
if the costs (S and H) and demands (D) are the same, which of the following is true with regard to the EPQ model as compared to the EOQ model
the lot size under the EPQ model is bigger than under the EOQ model
When is the basic EOQ model a special case of the EPQ model
the production rate per day approaches infinity
What are the two major decisions to be made when using the periodic review system
the time between orders and the target inventory level
If the costs (S and H) and demands (D) are the same, which of the follwoing is not true with regard to the EPQ model as compared to the EOQ model?
the two models use different formulas to compute annual ordering costs
If the costs (S and H) and demands (D) are the same, which of the follwoing is not true with regard to the EPQ model as compared to the EOQ model?
the two models use different formulas to computer annual holding cost
What does TBO stand for
time between orders
Which of the following represents an unlimited queue? A. faculty office with limited seating during office hours B. restaurant with no outside seating and limited capacity due to fire department restrictions C. drive-through lane at a fast-food restaurant D. small barbershop with only 5 chairs for waiting customers E. toll booth serving automobiles on an interstate
toll booth serving automobiles on an interstate
11. Which inventory function exists between the manufacturing plant and the distribution plant?
transportation inventory
Which of the following statements is NOT true
using perpetual inventory records results in different order quantities than using a two bin system
The formula to calculate a week's of supply is
week of supply=average on hand in dollars/average weekly usage in dollars