OPM 101 Exam 2
In a system with positive lead time, a total of 100 units of inventory are held on hand, and a total of 300 units of inventory are on-order. Inventory position=
400 units
A company has monthly inventory turns of 4, what is the company's days-of-supply? (1 month=20 days)
5 (20/4)
A ________ is a situation when a customer experiences stock-out of a product he/she wants, and waits for the item to become available.
Backorder
A newsvendor orders the quantity that maximizes expected profit for two products, A and B. These two products have the same critical ratio. The demand forecast for both products is 9,000 units and both are normally distributed. Product A has more uncertain demand in the sense that it has the larger standard deviation. Of which of the two products does the newsvendor order more?
Cannot determine. More information is needed.
Imagine that you use an order-up-to policy to manage inventory in a store. The order-up-to level=50 units. The effective lead time is 3 days. Now it is time to place an order. Your current inventory on hand is 35 units. How much would you order?
Cannot determine. More information is needed.
As demand increases, the EOQ increases at the same rate of demand, i.e., EOQ increases proportionally in demand rate
False
In an order-up-to model, when the effective lead time (L+1) is doubled, the safety stock will be more than doubled.
False
Inventory position cannot drop below the order-up-to level S
False
In the EOQ problem, when an order quantity is determined higher than EOQ,
Fixed ordering cost will be smaller than holding cost.
Bread expires at the end of the day and cannot be sold. This is related to which kind of inventory cost?
Holding cost
Which of the following is NOT a category of inventory?
Human resources
C&A sells two kinds of eggs: brown and white. Brown eggs are 5% more expensive than white. Which of the following is the most appropriate way to measure how many eggs C&A has in inventory?
In dollars
For an order-up-to model with lead time L periods, which of the following statements is TRUE
Inventory decision is made to balance the supply and demand over L+1 periods
Which of the following is NOT an assumption of the EOQ model?
It is possible to receive a purchase discount in order quantity is sufficiently large.
The reasons for holding inventory include all of the following EXCEPT:
It takes time to transport them
Inventory holding costs include all of the following EXCEPT:(includes storage, spoilage, and opportunity cost of capital)
Loss of sale cost
A firm evaluates its EOQ quantity to equal 180 cases but it chooses an order quantity of 200 cases. Relative to the order quantity of 180 cases, the order quantity of 200 cases has:
Lower (fixed) ordering cost and higher holding cost
Which of the following is NOT an essential skill for inventory management?
Negotiation
Which is the curve that best depicts the EOQ cost function C(Q)
Nike sign curve
Demand in each period is normally distributed and an order-up-to model is used to decide the order quantity. Which of the following does NOT influence the order up to level (i.e. a change in which of the following would NOT change the order up to level)?
None of the above
Which of the following does NOT have an impact on newsvendor quantity?
None of the above
Which of the following is not considered an inventory related cost?
None of the above.
In the order-up-to model, when demand standard deviation increases, which of the statement below is NOT correct
On-order inventory increases
Which of the curve below depict the relation between critical ratio and safety stock
Opposite of nike sign
In the newsvendor problem, when overage costs equals to underage cost, which of the following statement regarding the newsvendor order quantity Q*=u+zo is NOT correct
Q* is determined by the critical ratio 100%
Which of the following statement of risk pooling effect is NOT true?
Risk pooling effect improves the business's profit by attracting more demand
When the critical ratio increases from 90% to 99.9% in an order-up-to model, which of the following is likely to happen to the safety stock?
Safety stock increases by more than 10%
Which of the following regarding safety stock is INCORRECT?
Safety stock increases proportionally in lead time
Which of the following is TRUE regarding the source of economies of scale in inventory management according to the EOQ model?
The source of economies of scale is a fixed ORDERING COST
A newsvendor order quantity should be either higher than the mean demand or lower than the mean demand
True
If two firms have the same months of supply, they also have the same annual inventory turns
True
The total inventory holding cost incurred by an item depends on how long it actually spends in inventory
True
C&A is a car manufactures. If its annual inventory turns increases, what happens to its inventory level?
decreases
Inventory turns and days-of-supply measure _____ items in ______.
how long, inventory
Suppose inventory is managed using the order-up-to model. Which of the following actions will certainly lead to a higher order-up-to level? in all cases assume the characteristics of demand process do not change. i. Increase in the target in -stock probability (for the same lead time). ii. increase in the lead time (for the same in-stock probability).
i and ii.
Which trade-offs are considered the (r,Q) model? i. order frequency vs. bulk size ii. fixed ordering cost vs. holding cost iii. overstock vs. understock iv. holding cost vs. stock-out cost
i. ii. iii. and iv.
If the purchase cost of the parka is reduced, the newsvendor order quantity will
increase
Inventory growth problem
is too much to satisfy the 100% more stores
Higher days of supply means _____ inventory.Higher turns means _____ inventory.
more, less
On-order inventory is also known as ______ inventory
pipeline
Inventory held to protect a firm against running stock-out-due to unpredictable demand is called
safety stock
