Content Quiz 7: Inventory Management (Module 7)

You would like to use the fixed-time period inventory model to compute the desired order quantity for a company. You know that vendor lead time is 10 days and the number of days between reviews is 15. Which of the following is the standard deviation of demand during the review and lead time period if the standard deviation of daily demand is 10?

50

Which of the following is not a component of total costs in a fixed-quantity inventory system?

Annual production labor costs

Which of the following is NOT a good reason to hold inventory?

As needed to improve company cash flow.

In a single-period inventory model, critical ratio value indicates the probability of the last unit in the stock being sold.

False

In inventory models, high holding costs tend to favor high inventory levels.

False

The fixed-time period inventory system has a smaller average inventory than the fixed-order quantity system.

False

Which multi-period inventory system is used for high-priced, critical or important items?

Fixed-order quantity

The managerial and clerical costs to prepare purchase or production orders are called:

Ordering costs

Using the ABC classification system for inventory, which of the following is a true statement?

The "A" items are of high dollar volume

Fixed-time period models tend to have more safety stock than fixed-order quantity models because the inventory is not tracked as closely.

True

In a fixed-time period inventory model, the interval of time between orders is fixed and order quantity varies.

True

Safety stock inventory levels are determined by the probability of stock out at a given desired service level.

True

The fixed-order quantity inventory model requires more time to maintain because every addition or withdrawal is logged.

True

The key difference between a fixed-order quantity inventory model, where demand is known and one where demand is uncertain is in computing the reorder point.

True

The marginal analysis indicates that the optimal stocking level (in a newsvendor problem) occurs at the point where the expected benefits derived from carrying the next unit are less than the expected costs for that.

True