SCMA 331 - Ch 12, CHAPTER 12 Section 7 Fixed-Period (P) Systems

Which of the following is a requirement of Q systems? A) perpetual inventory system B) constant order spacing C) variable lead time D) constant demand E) all of the above

A

An advantage of the fixed-period inventory system is that:

B) there is no physical count of inventory items when an item is withdrawn.

In the basic EOQ model, if D = 6000 per year, S = $100, and holding cost = $5 per unit per month, what is the economic order quantity?

C) 141

If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95 percent service requires how much safety stock?

C) 49 units

Which of the following statements regarding control of service inventories is TRUE?

C) Effective control of all goods leaving the facility is one applicable technique.

A bakery wants to determine how many trays of doughnuts it should prepare each day. Demand is normal with a mean of 5 trays and standard deviation of 1 tray. If the owner wants a service level of at least 95%, how many trays should he prepare (rounded to the nearest whole tray)? Assume doughnuts have no salvage value after the day is complete.

D) 7

The proper quantity of safety stock is typically determined by:

D) setting the level of safety stock so that a given stockout risk is not exceeded.

A disadvantage of the fixed-period inventory system is that:

D) since there is no count of inventory during the review period, a stockout is possible.

Which of the following is an element of inventory holding costs?

E) All of the above are elements of inventory holding costs.

A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard deviation of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level?

A) .60

A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides a 95% service level?

A) 41

Which of the following statements about ABC analysis is FALSE?

D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.

Among the advantages of cycle counting is that it:

D) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory.

Which of the following items is mostly likely managed using a single-period order model?

A) Christmas trees

Q is to ________ systems as P is to ________ systems.

A) fixed quantity, fixed period

In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will:

A) increase by about 41%.

The main trait of a single-period model is that:

A) inventory has limited value after a certain period of time.

Which of the following is a requirement of Q systems?

A) perpetual inventory system

ABC analysis divides on-hand inventory into three classes,

E) annual dollar volume

In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. What is the standard deviation of demand during lead time?

C) 154 units

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. What is the production order quantity for this problem?

C) 184

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

A) a stockout can occur during the review period as well as during the lead time.

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost ________ per year in total annual inventory (holding and setup) costs.

B) $800

A product has a demand of 4000 units per year. Ordering cost is $20, and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order:

B) 200 units per order.

A production order quantity problem has a daily demand rate = 10 and a daily production rate = 50. The production order quantity for this problem is approximately 612 units. What is the average inventory for this problem?

B) 245

All EXCEPT which of the following statements about ABC analysis are true?

D) ABC analysis suggests that all items require the same high degree of control.

Which of these statements about the production order quantity model is FALSE?

D) All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity.

Which of the following statements about the basic EOQ model is FALSE?

D) If annual demand were to double, the EOQ would also double.

Which of the following is NOT an assumption of the economic order quantity model shown below? Q* = SQRT((2DS)/H)

D) Production and use can occur simultaneously.

Which of the following statements about quantity discounts is FALSE?

D) The larger the annual demand, the less attractive a discount schedule will be.

If demand is not uniform and constant, then stockout risks can be controlled by:

D) adding safety stock.

The purpose of safety stock is to:

D) control the likelihood of a stockout due to variable demand and/or lead time.

Which of the following is NOT one of the four main types of inventory?

D) safety stock inventory

Which of the following would NOT generally be a motive for a firm to hold inventories?

D) to minimize holding costs

What is the primary purpose of the basic economic order quantity model shown below? Q* = SQRT((2DS)/H)

D) to minimize the sum of setup cost and holding cost

What is the difference between P and Q inventory systems?

E) A and B A) order size B) order spacing

Which of the following is a function of inventory?

E) All of the above are functions of inventory.

Which of the following statements regarding the reorder point is TRUE?

E) All of the above are true.

Which of the following statements about the basic EOQ model is TRUE?

E) All of the above statements are true.

Service level is:

E) B and D B)the probability of not stocking out. and D)calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage) for single-period models.

If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock?

E) Cannot be determined without lead time data.

When quantity discounts are allowed, the cost-minimizing order quantity:

E) minimizes the sum of holding, ordering, and product costs.

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

E) more than 40

Which category of inventory holding costs has a much higher percentage than average for rapid-change industries such as PCs and cell phones?

E) pilferage, scrap, and obsolescence

Which of the following should be higher in P systems than Q systems?

E) safety stock

An inventory decision rule states, "When the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is TRUE?

B) Fourteen is the reorder point, and 100 is the order quantity.

Cycle counting:

B) eliminates annual inventory adjustments.

The fixed-period inventory model can have a stockout during the review period as well as during the lead time, which is why fixed-period systems require more safety stock than fixed-quantity systems.

T

Which of the following statements regarding the production order quantity model is TRUE?

B) It relaxes the assumption that all the order quantity is received at one time.

Which of the following statements regarding Amazon.com is FALSE?

B) The company was founded as, and still is, a "virtual" retailer with no inventory.

A product whose EOQ is 400 units experiences a 50% increase in demand. The new EOQ is:

B) increased by less than 50%.

A product whose EOQ is 40 units experiences a decrease in ordering cost from $90 per order to $10 per order. The revised EOQ is:

B) one-third as large.

ABC analysis is based upon the principle that:

B) there are usually a few critical items, and many items that are less critical.

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model is 200 units, and the total annual inventory (carrying and setup) cost is $600. What is the inventory carrying cost per unit per year for this item?

C) $3.00

Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80. They currently have no salvage value. If the stand owner is able to find an outlet that would provide a salvage value of $0.10, what would be the increase in service level?

C) .07

A certain type of computer costs $1,000, and the annual holding cost is 25% of the value of the item. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

C) 110

If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, a 90 percent service level will require how much safety stock?

C) 13 units

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand: Q* = SQRT((2DS)/H)

C) is one-half of the economic order quantity.

The two most basic inventory questions answered by the typical inventory model are:

C) timing of orders and order quantity.

Most inventory models attempt to minimize:

C) total inventory-based costs.