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Using the probability approach to determine an inventory safety stock and wanting to be 95 percent sure of covering inventory demand, which of the following is the number of standard deviations necessary to have the 95 percent service probability assured? A. 1.28 B. 1.64 C. 1.96 D. 2.00 E. 2.18
B. 1.64
Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days? A. 421 B. 234 C. 78 D. 26 E. 312
B. 234 78*3=234
Assuming no safety stock, what is the re-order point (R) given an average daily demand of 50 units, a lead time of 10 days and 625 units on hand? A. 550 B. 500 C. 715 D. 450 E. 475
B. 500 50*10=500
Which of the following is usually included as an inventory holding cost? A. Order placing B. Breakage C. Typing up an order D. Quantity discounts E. Annualized cost of materials
B. Breakage
Which of the following is a perpetual system for inventory management? A. Fixed-time period B. Fixed-order quantity C. P model D. First-in-first-out E. The wheel of inventory
B. Fixed-order quantity
When developing inventory cost models, which of the following are not included as costs to place an order? A. Phone calls B. Taxes C. Clerical D. Calculating quantity to order E. Postage
B. Taxes
Computer inventory systems are often programmed to produce a cycle count notice in which of the following case? A. When the record shows a near maximum balance on hand B. When the record shows positive balance but a backorder was written C. When quality problems have been discovered with the item D. When the item has become obsolete E. When the item has been misplaced in the stockroom
B. When the record shows positive balance but a backorder was written
Which of the following is one of the categories of manufacturing inventory? A. Economic Order Inventory B. Work-in-process C. Quality units D. JIT Inventory E. Re-order point
B. Work-in-process
Which of the following values for "z" should we use in as safety stock calculation if we want a service probability of 98%? A. 1.64 B. 1.96 C. 2.05 D. 2.30 E. None of the above
C. 2.05
The Pareto principle is best applied to which of the following inventory systems? A. EOQ B. Fixed-time period C. ABC classification D. Fixed-order quantity E. Single-period ordering system
C. ABC classification
Which of the following is the set of all cost components that make up the fixed-order quantity total annual cost (TC) function? A. Annual purchasing cost, annual ordering cost, fixed cost B. Annual holding cost, annual ordering cost, unit cost C. Annual holding cost, annual ordering cost, annual purchasing cost D. Annual lead time cost, annual holding cost, annual purchasing cost E. Annual unit cost, annual set up cost, annual purchasing cost
C. Annual holding cost, annual ordering cost, annual purchasing cost
Which of the following is not an assumption of the basic fixed-order quantity inventory model? A. Ordering or setup costs are constant B. Inventory holding cost is based on average inventory C. Diminishing returns to scale of holding inventory D. Lead time is constant E. Demand for the product is uniform throughout the period
C. Diminishing returns to scale of holding inventory
Which of the following is an assumption of the basic fixed-order quantity inventory model? A. Lead times are averaged B. Ordering costs are variable C. Price per unit of product is constant D. Back orders are allowed E. Stock-out costs are high
C. Price per unit of product is constant
Firms keep supplies of inventory for which of the following reasons? A. To maintain dependence of operations B. To provide a feeling of security for the workforce C. To meet variation in product demand D. To hedge against wage increases E. In case the supplier changes the design
C. To meet variation in product demand
In making any decision that affects inventory size, which of the following costs do not need to be considered? A. Holding costs B. Setup costs C. Ordering costs D. Fixed costs E. Shortage costs
D. Fixed costs
Which of the following is not one of the categories of manufacturing inventory? A. Raw materials B. Finished products C. Component parts D. Just-in-time E. Supplies
D. Just-in-time
Which of the following is not necessary to compute the order quantity using the fixed-time period model with safety stock? A. Forecast average daily demand B. Safety stock C. Inventory currently on hand D. Ordering cost E. Lead time in days
D. Ordering cost
Which of the following are fixed-time period inventory models? A. The EOQ model B. The least cost method C. The Q model D. Periodic system model E. Just-in-time model
D. Periodic system model
Using the ABC classification system for inventory, which of the following is a true statement? A. The "C" items are of moderate dollar volume B. You should allocate about 50 % of the dollar volume to "B" items C. The "A" items are of low dollar volume D. The "A" items are of high dollar volume E. Inexpensive and low usage items are classified as "C" no matter how critical
D. The "A" items are of high dollar volume
When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time? A. Normal variation in shipping time B. A shortage of material at the vendor's plant causing backlogs C. An unexpected strike at the vendor's plant D. A lost order E. Redundant ordering systems
E. Redundant ordering systems
Which of the following is the symbol used in the textbook for the cost of placing an order in the fixed-order quantity inventory model? A. C B. TC C. H D. Q E. S
E. S
To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R? A. The product of average daily demand times a standard deviation of lead time B. A "z" value times the lead time in days C. The standard deviation of vendor lead time times the standard deviation of demand D. The product of lead time in days times the standard deviation of lead time E. The product of the standard deviation of demand variability and a "z" score relating to a specific service probability.
E. The product of the standard deviation of demand variability and a "z" score relating to a specific service probability.
Which of the following is not a reason to carry inventory? A. To provide a safeguard for variation in raw material delivery time B. To take advantage of economic purchase-order size C. To maintain independence of operations D. To meet variation in product demand E. To keep the stock out of the hands of competitors
E. To keep the stock out of the hands of competitors
Which of the following are the recommended percentage groupings of the ABC classifications of the dollar volume of products? A. A items get 15%, B items get 35%, and C items get 50% B. A items get 15%, B items get 45%, and C items get 40% C. A items get 25%, B items get 35%, and C items get 40% D. A items get 25%, B items get 15%, and C items get 60% E. A items get 20%, B items get 30%, and C items get 50%
A. A items get 15%, B items get 35%, and C items get 50%
Which of the following is not included as an inventory holding cost? A. Annualized cost of materials B. Handling C. Insurance D. Pilferage E. Storage facilities
A. Annualized cost of materials
Which of the following are fixed-order quantity inventory models? A. Economic order quantity model B. The ABC model C. Periodic replenishment model D. Cycle counting model E. P model
A. Economic order quantity model
In order to determine the standard deviation of usage during lead time in the reorder point formula for a fixed-order quantity inventory model which of the following must be computed first? A. Standard deviation of daily demand B. Number of standard deviations for a specific service probability C. Stockout cost D. Economic order quantity E. Safety stock level
A. Standard deviation of daily demand