Chapter 12

A production facility is trying to expand production on a machine that is currently used to produce one part. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What percentage of the time are they using this machine? A. 0,3 B. 0,2 C. 0,5 D. 0,4

0,5

In an A-B-C system , A items typically represent about what percent of the items? A. 50% B. 15% C. 75% D. 25%

15%

A company wishes to determine the EOQ for an item that has an annual demand of 2,000 units, a cost per order of $75, and annual carrying cost of $7.50 per unit. What is the EOQ? A. 40,000 units B. 100 C. 73 D. 200 units

200 units

Demand for a perishable item can be described by a uniform distribution that ranges from 18 units per period to 30 units per period. If shortage and excess costs are equal, the optimal stocking level would be: A. 30 B. 24 C. 18 D. 36

24

A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for this item? A. 283 B. 65 C. 400 D. 800

400

In an A-B-C system, C items typically represent about what percent of the items? A. 75% B. 30% C. 15% D. 60%

60%

A store wants to ensure a shelf full of marshmallow peeps as the holiday season approaches. Daily demand for peeps is normally distributed with a mean of 25 and a standard deviation of 5. Lead time is 3 days and the store intends a 98% service level. What is their reorder point? A. 87 B. 75 C. 93 D. 107

93

Which one of the following would not be included in a list of assumptions of the basic EOQ model? A. Lead time does not vary. B. Annual demand is a known quantity. C. There are no quantity discounts. D. All are assumptions.

D. All are assumptions.

The quantity discount model is most similar to which one of these models? A. Single period. B. ROP C. EOQ. D. Fixed interval.

EOQ

Which one of the following is not a reason for holding inventories? A. To be able to buy in economical lot sizes B. To decouple stages of production C. As a hedge against inflation D. It increases carrying costs

It increases carrying costs

Which of the following is NOT a type of inventory? A. raw material B. work-in-process C. MRP D. finished goods

MRP

Setup costs are similar to which costs? A. Shortage B. Holding C. Ordering D. Carrying

Ordering

Which inventory model does not provide an order quantity A. ROP B. EOQ C. Single-period. D. Fixed-interval

ROP

Which one of the following is a true statement concerning the relationship between holding and ordering costs in the basic EOQ model? A. Holding cost is always greater than ordering cost at the EOQ. B. Holding cost is sometimes equal to ordering cost, and sometimes less at the EOQ. C. The two are always equal at the EOQ. D. There is no relationship between the two

The two are always equal at the EOQ

Which one of the following is not a requirement for effective inventory management? A. Using an EOQ model for determining order quantity B. A classification system for inventory items C. All are requirements D. Reasonable estimates of holding and shortage costs

Using an EOQ model for determining order quantity

A system that keeps track of each withdrawal or addition to inventory continuously is A. a fixed period system B. a continuous inventory system C. a perpetual inventory system. D. a fixed quantity system.

a perpetual inventory system

ABC analysis divides an organization's on-hand inventory into three classes based upon A. the number of units on hand. B. unit price C. annual dollar volume. D. annual demand.

annual dollar volume

The appropriate level of safety stock is typically determined by A. minimizing expected stockout cost B. carrying sufficient safety stock so as to eliminate all stockouts. C. choosing the level of safety stock that assures a given service level. D. taking the square root of the economic order quantity.

choosing the level of safety stock that assures a given service level

A system that triggers ordering on a uniform time basis is called a A. fixed-period system. B. fixed-quantity system. C. reorder point system. D. EOQ.

fixed-period system

In the quantity-discount model, if the total cost curves all reach their minimum levels at the same order quantity, this implies that: A. ordering costs are constant. B. ordering and setup costs are equal. C. holding costs are constant per unit D. holding costs are a percentage of unit price.

holding costs are constant per unit

In the probabilistic model, increasing the service level will A. have no impact on the cost of the inventory policy. B. cannot be determined. C. reduce the cost of the inventory policy. D. increase the cost of the inventory policy.

increase the cost of the inventory policy

Inventory record accuracy would be decreased by A. ABC analysis. B. reorder points. C. cycle counting. D. increasing stockroom accessibility.

increasing stockroom accessibility

Cycle counting A. cannot be done in an independent demand situation. B. provides a measure of inventory turnover. C. is a process by which inventory records are verified. D. assumes that all inventory records must be verified with the same frequency.

is a process by which inventory records are verified

Policies based on ABC analysis might include investing A. more in supplier development for A items. B. extra care in forecasting for C items. C. the most time and effort verifying the accuracy of records for B items. D. more in inventory security for C items.

more in supplier development for A items

Extra units that are held in inventory to reduce stockouts are called A. safety stock. B. reorder point. C. just-in-time inventory. D. demand variance.

safety stock

The difference(s) between the basic EOQ model and the production order quantity model is (are) that A. the EOQ model does not require the assumption of known, constant lead time. B. the production order quantity model does not require the assumption of instantaneous delivery. C. there are no holding costs in the production order quantity model. D. the production order quantity model does not require the assumption of known, constant demand.

the production order quantity model does not require the assumption of instantaneous delivery

One use of inventory is A. to provide a hedge against inflation. B. to tightly link production and distribution processes C. to tightly link a firm's production with its customers' demand. D. to ensure that item cost is maximized.

to provide a hedge against inflation

The two most important inventory-based questions answered by the typical inventory model are A. when to place an order and how many of an item to order. B. how many of an item to order and with whom the order should be placed. C. how many of an item to order and what is the cost of this order. D. when to place an order and what is the cost of the order.

when to place an order and how many of an item to order