OM - Chapter 12

50

A typical company has what percent of its current assets in inventory? A. 25% B. 35% C. 40% D. 50% E. 60%

that the level of safety stock required is lower than with an EOQ/ROP model.

All of the following are possible reasons for using the fixed order interval model except: A. that supplier policy encourages use. B. that grouping orders of items held in inventory can save in shipping costs. C. that the level of safety stock required is lower than with an EOQ/ROP model. D. that it is suited to periodic checks of inventory levels rather than continuous monitoring. E. that continuous monitoring is not practical.

40 pounds

Ann Chovies, owner of the Perfect Pasta Pizza Parlour, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and holding costs are 4 cents per pound per day. Lead time for each order is 3 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

4 days

Ann Chovies, owner of the Perfect Pasta Pizza Parlour, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and holding costs are 4 cents per pound per day. Lead time for each order is 3 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

64.10

Ann Chovies, owner of the Perfect Pasta Pizza Parlour, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and holding costs are 4 cents per pound per day. Lead time for each order is 3 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

100 pounds

Ann Chovies, owner of the Perfect Pasta Pizza Parlour, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and holding costs are 4 cents per pound per day. Lead time for each order is 3 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

60 pounds remaining

Ann Chovies, owner of the Perfect Pasta Pizza Parlour, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and holding costs are 4 cents per pound per day. Lead time for each order is 3 days, and the pepperoni itself costs $3.00 per pound.Without allowing for safety stock, what reorder point should be used to reorder pepperoni? A. 20 pounds remaining B. 40 pounds remaining C. 60 pounds remaining D. 80 pounds remaining E. 100 pounds remaining

significantly decreased order quantities

Based on the EOQ model, an appropriate strategy for managing inventory when there has been a dramatic increase in holding costs but ordering costs have been significantly reduced would be: A. unchanged order quantities. B. slightly decreased order quantities. C. significantly decreased order quantities. D. slightly increased order quantities. E. significantly increased order quantities.

distribution centres

Distribution requirements planning (DRP) is a planning method that determines time-phased replenishment schedules between a manufacturer's facility and _______. A. Customer locations B. Markets C. Distribution centres D. Tier one suppliers E. Tier one customers

the right goods in sufficient quantities

Effective use of inventories would be implied from which of the following? A. High number of back orders B. Low inventory turnover C. High numbers of days of inventory D. Understocking and overstocking of inventory items E. The right goods in sufficient quantities

greater than the EOQ

Given the same demand, setup/ordering costs, and holding costs, the EPQ will be: 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.

700 units

If average demand for an inventory item is 200 units per day, lead time is three days, and safety stock of 100 units is included, the reorder point (ROP) is: A. 100 units B. 200 units C. 300 units D. 600 units E. 700 units

130

If average demand for an item is 20 units per day, safety stock is 50 units, and lead time is four days, the reorder point (ROP) will be: A. 50 B. 70 C. 130 D. 170 E. 220

the expected usage during lead time

If no variations in demand or lead time exist, the reorder point (ROP) will equal: A. the EOQ. B. the expected usage during lead time. C. safety stock. D. the service level .E. the EOQ plus safety stock.

0.6

If, in a single period inventory situation, the probabilities of demand being 1, 2, 3, or 4 units are .3, .3, .2, and .2, respectively, what is the probability of selling no more than two units? A. .3 B. .5 C. .6 D. .8 E. .9

50

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. .87

80 percent

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

reorder point, the amount required until an order arrives

In a two-bin inventory system, the amount contained in the second bin is equal to the: A. reorder point, the amount required until an order arrives .B. the EOQ C. amount in the first bin. D. optimum stocking level. E. safety stock.

15-20 percent

In an A-B-C inventory system, the typical percentage of the number of types of items in inventory that represent the A classification items is about: A. 15 - 20 percent. B. 20 - 30 percent. C. 40 - 50 percent. D. 70 - 80 percent.E. More than 90 percent.

a items

In the A-B-C classification system, items which account for 70 to 80 percent of the annual dollar value (ADV) but relatively few inventory items in terms of the number of SKUs would be classified as: A. A items. B. B items. C. C items. D. either A items or B items. E. either B items or C items.

c items

In the A-B-C classification system, items which account for about 5 - 10 percent of the annual dollar value (ADV) but 50 - 60 percent of the SKUs in inventory would be classified as: A. A items. B. B items. C. C items. D. either A items or B items E. either B items or C items.

4

In the EOQ model with planned shortages, if annual demand is 100, holding cost is $400, ordering cost is $20, and back-order cost is $200, the quantity back-ordered per replenishment cycle, rounded to the next whole number, is: A. 3 B. 4 C. 5 D. 7 E. 20

11

In the EOQ model with planned shortages, if annual demand is 500, holding cost is $200, ordering cost is $15, and back-order cost is $400, EOQ (rounded to the next whole number) is: A. 8 B. 9 C. 11 D. 13 E. 113

4

In the EOQ model with planned shortages, if annual demand is 500, holding cost is $200, ordering cost is $15, and back-order cost is $400, the quantity back-ordered per replenishment cycle, rounded to the next whole number, is: A. 3 B. 4 C. 5 D. 12 E. 38

20

In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1/unit per year will result in an EOQ of: A. 20 B. square root of 200 C. 200 D. 400 E. 40

12

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

it increases by about 40 percent

In the basic EOQ model, if annual demand doubles, the effect on the EOQ is that: 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.

28

In the basic EOQ model, if annual demand is 50, holding cost is $2, and ordering cost is $15, the EOQ (rounded to the next whole number) is: A. 11 B. 20 C. 24 D. 28 E. 375

remain the same

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 two. D. remain the same. E. increase by the same ratio as lead time.

ordering cost multiplied by the ratio of total annual demand to the EOQ.

In the basic EOQ model, the annual ordering cost is equal to: A. the EOQ multiplied by ordering cost. B. the EOQ divided by ordering cost. C. ordering cost multiplied by the ratio of total annual demand to the EOQ. D. ordering cost multiplied by the ratio of the EOQ to total annual demand. E. ordering cost multiplied by annual demand.

be in a feasible range

In the quantity discount model, 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 the smallest quantity compared to other EOQs.

67 percent

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

optimization

Inventory _________ is a method that determines the location and optimal level of inventory in the supply chain. A. optimization B. planning C. positioning D. distribution E. management

elimination of periodic counting of inventory

Laser scanning of universal product codes at retail checkout counters does not provide which of the following advantages? A. Increased speed and accuracy at checkout B. Continuous information on inventories C. Elimination of periodic counting of inventory D. Improved levels of customer service

2 times the square root of 20

Lead time is exactly 20 days long. Daily demand is normally distributed with a mean of 10 gallons per day and a standard deviation of 2 gallons. What is the standard deviation of demand during lead time? A. 20 2 B. 20 10 C. 2 times the square root of 20 D. 2 times the square root of 10 E. 40 days

supermarkets

Of the following, which has the highest inventory turns per year? A. supermarkets B. furniture stores C. clothing stores D. convenience stores E. home electronics and appliance stores

unchanged or greater

Relative to the basic EOQ model, the introduction of quantity discounts will cause the optimum order quantity to be: A. always smaller. B. always unchanged. C. always greater. D. smaller or unchanged. E. unchanged or greater.

2,500 bills remaining

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 holding a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armoured car delivery costs, and that order lead time is six days.Assuming a thirty-day month, and without allowing for safety stock, 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

14.4

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 holding a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armoured car delivery costs, and that order lead time is six days.Assuming a thirty-day month, if she were to order 6,000 bills at a time, what would be the length of an order cycle? A. 0.48 days B. 2.08 days C. 6 days D. 8.4 days E. 14.4 days

3,125

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 holding a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armoured 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. $5,000

300,000

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 holding a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armoured 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

866 bills

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 holding a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armoured car delivery costs, and that order lead time is six days.What is the economic order quantity? A. 866 bills B. 3,000 bills C. 6,000 bills D. 10,392 bills E. 12,500 bills

determining fixed order quantities

The basic 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.

grouping orders can save shipping costs

The fixed order interval model would most likely to be used for which of the following situations? 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.

minimize the sum of ordering and holding costs

The goal of the basic EOQ model is to: A. Minimize order size. B. Minimize order cost. C. Minimize holding cost. D. Minimize the sum of purchasing and ordering costs. E. Minimize the sum of ordering and holding costs.

12.80

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $20.00 per order, and Stein beer costs $8.00 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 five percent of the cost of a Stein beer case.If he has 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. $3.20 B. $6.40 C. $9.60 D. $12.80 E. $16.00

8 cases

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $20.00 per order, and Stein beer costs $8.00 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 five percent of the cost of a Stein beer case.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

4 days

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $20.00 per order, and Stein beer costs $8.00 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 five percent of the cost of a Stein beer case.If he were to order 16 cases of Stein beer at a time, what would be the length of an order cycle? A. 0.25 days B. 3 days C. 1 day D. 4 days E. 20 days

10 cases

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $20.00 per order, and Stein beer costs $8.00 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 five percent of the cost of a Stein beer case.What is the economic order quantity for Stein beer? A. 4 cases B. 8 cases C. 10 cases D. 20 cases E. 80 cases

12 cases remaining

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $20.00 per order, and Stein beer costs $8.00 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 five percent of the cost of a Stein beer case.Without allowing for safety stock, what reorder point should be used to reorder Stein beer? A. 0 cases remaining B. 4 cases remaining C. 12 cases remaining D. 16 cases remaining E. 20 cases remaining

20 days

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 hold 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 (4) days.If order size was 1,000 kilograms of resin, what would be the length of an order cycle? A. 0.05 days B. 4 days C. 16 days D. 20 days E. 50 days

500 kilograms

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 hold 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 (4) 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

25

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 hold 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 (4) 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

500 kilograms

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 hold 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 (4) 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

200 kilograms remaining

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 hold 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 (4) days.Without allowing for safety stock, what reorder point should be used to reorder resin? A. 0 kilograms remaining B. 50 kilograms remaining C. 200 kilograms remaining D. 400 kilograms remaining E. 500 kilograms remaining

decreases lead time variability

The need for safety stock can be reduced by an inventory planning strategy which: A. increases lead time. B. increases lead time variability. C. increases lot sizes. D. decreases ordering costs E. decreases lead time variability.

reduce discrepancies between inventory records and actual

The purpose of "cycle counting" is to: A. count all the items in inventory. B. determine the optimum re-order point. C. reduce discrepancies between inventory records and actual. D. reduce theft. E. reduce inventory levels

multi-echelon inventory management.

The situation when inventories are held at more than one location in a company's outbound distribution supply chain is referred to as: A. A-B-C classification for inventory management. B. order up to level inventory management. C. economic production quantity inventory planning. D. multi-echelon inventory management. E. basic economic order quantity inventory model.

purchase lead time

The time interval between ordering and receiving an order is called: A. Order delay B. Purchase lead time C. Lead time offset D. Order cycle E. Order interval

hedging against price increases

What function of inventory is the term "anticipation inventory" associated with? A. Hedging against price increases B. Smoothing seasonal demand or production C. Decoupling operations D. Taking advantage of quantity discounts E. Preventing shortages

holding costs at the distribution centre

What is not required for distribution requirement planning to establish replenishment schedules between a distribution centre and retail outlets? A. Demand forecasts at each retailer B. Current inventory on hand C. Lead times D. Holding costs at the distribution centre E. Order quantities

single period

Which inventory model is most appropriate if unused or unsold items cannot be carried over to subsequent periods? A. Economic order quantity B. Economic production quantity C. Single period D. Quantity discount E. Reorder point

preparing purchase orders

Which is not considered a holding cost? A. Warehousing costs B. Insurance C. Building depreciation D. Opportunity cost of funds E. Preparing purchase orders

parts and components for as assembly plant with high variability in output

Which item would be least likely to be ordered under a fixed order interval system? A. Textbooks at a college bookstore. B. Parts and components for an assembly plant with high variability in output. C. Cards at a gift shop. D. Canned peas at a supermarket. E. Car batteries at a "big box" retailer.

two-bin system - grocery stores

Which of the following does not match with respect to inventory counting and replenishment models? A. Periodic counting - fixed-order-interval model B. Periodic counting - small retailers C. Two-bin system - grocery stores D. Perpetual tracking - fixed order-quantity model E. Perpetual tracking - reorder point (ROP) model

store obsolete items in the highest locations

Which of the following is not a suggestion for an inventory storage system? A. Store heavy or fast-moving items on the floor. B. Store obsolete items in the highest locations. C. Have the right level of automation. D. Have controlled access to the building. E. Make sure the storeroom is not cluttered.

there are no backorders

Which of the following is not an assumption of the EOQ with planned shortages model? A. There are no backorders. B. Demand rate is constant. C. There are no quantity discounts. D. Lead time is constant.

holding costs are independent of price

Which of the following is not an assumption of the basic EOQ model? A. Lead time does not vary. B. Only one product is involved. C. Holding costs are independent of price. D. Each order is received in a single delivery. E. There are no quantity discounts.

cost of the items purchased

Which of the following is not included in ordering cost? A. Time spent paying invoices B. Moving delivered goods to temporary storage C. Inspecting incoming goods D. Taking an inventory count to determine how much needs to be ordered E. Cost of the items purchased

there are no ordering or setup costs

Which of the following is not true for the EPQ model? A. Usage rate is assumed to be constant. B. Production rate exceeds usage rate. C. The maximum inventory occurs just after production ceases. D. There are no ordering or setup costs. E. Average inventory is calculated as one-half maximum inventory.

fresh fish

Which of these products would be most likely to involve the use of a single period model for ordering? A. Gold coins B. Hammers C. Fresh fish D. Calculators E. Frozen corn

The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time.

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. The probability is 95 percent that demand during lead time will not exhaust the inventory. C. The probability is 95 percent that demand during lead time will exactly equal the amount on hand at the beginning of lead time. D. The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time.

The probability is 95 percent that all demand over the year will not exceed supply.

Which one of the following is implied by an "annual" service level of 95 percent? A. Approximately 95 percent of demand between orders will be satisfied. B. The probability is 95 percent that all demand over the year will exceed supply. C. The probability is 95 percent that all demand over the year will equal supply. D. The probability is 95 percent that all demand over the year will not exceed supply. E. Approximately 95 percent of demand between orders will be lost.

purchase cost

Which one of the following is not a determinant of the reorder point (ROP)? A. Rate of demand B. Length of lead time C. Lead time variability D. Stock-out risk E. Purchase cost

the EOQ

Which one of these would not be a factor in determining the level of the reorder point that includes safety stock? A. The EOQ. B. The lead time .C. The variability of demand. D. The demand or usage rate.

C

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

quantity discounts are available

which of the following is not one of the assumptions of the basic EOQ model? A. Annual demand requirements are known B. Lead time does not vary. C. Each order is received in a single delivery. D. Quantity discounts are available. E. Only one product is involved.