OPSM 3830: Ch. 13 - Inventory Management

Which is the correct formula for the average inventory in the EPQ model?

(I max)/2

Which is the correct formula for the total cost in the EPQ model?

(I max/2)H + (D/Q)S

Which is the correct formula for the maximum inventory in the EPQ model?

(Q to the little p/p)(p-u)

Which is the correct formula for the annual holding cost in the EOQ model?

(Q/2)H Q=Order Quantity in units H=Holding (carrying) cost per unit per year

which is the correct formula for the total annual cost in the eoq model

(Q/2)H + (D/Q)S

Which of the following statements about inventory control systems is/are true?

- Some businesses are moving towards using RFID tags to track inventory -Orders in two-bin systems may not be placed at the right time.

Which of the following statements about the fixed-order-interval model is/are true?

- The order point is fixed - It requires higher levels of safety stock than a fixed-quantity model It can produce savings in shipping costs

The procedure for determining the overall EOQ differs slightly, depending on which of these two cases is relevant?

1. Carrying costs are constant 2. Carrying costs are a percentage of price

Place the steps for determining the optimal order quantity when H is constant and quantity discounts are available in the correct order.

1. Compute the EOQ 2. Identify the price at which the EOQ is feasible 3. if the feasible point is not in the range, compute the total cost for all price points at or below the feasible point 4. Select the point with the lowest cost

Steps of A-B-C Approach

1. Multiply annual volume by unit price for each item 2. Arrange items in descending order by annual dollar value 3. Classify the items as A, B, or C

What are the assumptions of the EOQ model?

1. Only one product is involved 2. Annual demand requirements are known 3. Demand is spread evenly throughout the year so that the demand rate is reasonably constant 4. Lead time is known and constant 5. Each order is received in a single delivery 6. There are no quantity discounts

Which of the following statements about the EOQ model is/are true?

1. Orders are placed when there is just enough inventory left to cover the lead time demand. 2. The EOQ minimizes the sum of annual ordering and holding costs.

Which of the following statements about reorder point is/are true?

1. The reorder point occurs when the quantity on hand drops to a predetermined amount. 2. includes expected demand during lead time & extra stock 3. place an order when the amount of inventory on hand is sufficient to satisfy demand during the time it takes to receive that order 4. Safety stock is required when demand and/or lead time is a variable

Match the following inventory categories with APICS recommendations

A: (+/-) 0.2% B: (+/-) 1% C: (+/-) 5%

_____ _____ is a physical count of items in inventory used to reduce the discrepancies between inventory records and the actual items on hand

Cycle Count

Which of the following is NOT a way inventory affects performance measures?

Dividends

safety stock

Extra inventory that a company holds to protect itself against uncertainties in either demand or replenishment time.

Which of the following statements about quantity discount models is/are NOT true?

If H is fixed, the cost curves have different minimum points If H is variable, the cost curves have the same minimum point

Which of the following statements about the economic production quantity is/are true?

Inventory trickles in as it is produced Unlike the EOQ model, there are no ordering costs.

which of the following is correct regarding inventory monitoring under the fixed order inventory model

Only periodic checks of inventory requried

Which of the following statements about inventory control systems is/are NOT true?

Perpetual inventory systems are always able to accurately report inventory levels. UPCs and point-of-sale systems do not work well together. An advantage of periodic systems is the lack of safety stock required.

Which of the following is the correct formula for the order quantity in the Fixed Order Interval Model?

Q = d̅(OI + LT) + zσd√(OI+LT) - A

_____ _____ is the cost resulting when demand exceeds supply

Shortage cost

Formula for economic production quantity

SqRt (2DS)/H * SqRt p/(p-u)

Inventory is a _____ or _____ of goods

Stock, Store

Which of the following statements about the economic production quantity is/are NOT true?

The maximum inventory level is the same as the EPQ The assumptions are the same as in the EOQ model

Which of the following statements about quantity discount models is/are true?

There are two possible cases for what the value of H, fixed or dependent on the purchase prices. The optimal quantity may not be the same as the EOQ. Total cost must include product cost to evaluate options.

What triggers orders in a fixed-order-interval model?

Time since last order

Which of the following is/are the basic issue/s of inventory management?

When to order How much to order

The overall objective of inventory management is to achieve satisfactory levels of _______ while keeping inventory _________ reasonable.

customer service, costs

______ stock is the amount of inventory required to meet expected demand

cycle

Manufacturing firms have used ________ as buffers between successive operations to maintain continuity of productions that would otherwise be disrupted by events such as breakdowns of equipment and accidents that cause a portion of the operation to shut down

inventories

_____ _____ is the ratio of average cost of goods sold to average inventory investment

inventory turnover

Which of the following are considered types of inventory in a manufacturing facility?

raw materials maintenance and repairs work in process furnished goods in-transit goods

The _____ _____ is the percentage of demand filled by the inventory on hand.

service level

____________ cost is the unit unrealized profit, while the _____________ cost is the difference between the purchase price and salvage value of an item

shortage, excess

Formula for economic order quantity

square root of 2DS/H

Ordering cost

the fixed cost of placing and receiving a single order

Place the steps for finding the EOQ in a quantity discount model with variable H in the correct order.

1. Start with the lowest price 2. If the minimum point is feasible... 3. Otherwise, compare total costs... 4. The optimal point is the quantity that yields the lowest cost