Chapter 13
c
10. A wide and short density function has a large ____________ relative to the _________. A. mean, standard deviation B. mean, outcome C. standard deviation, mean D. standard deviation, outcome
B
11. The ________ function provides the probability that an outcome is a certain level or ________. A. density, lower B. distribution, lower C. density, higher D. distribution, higher
A
13. Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is 400 or less? A. 97.7% B. 95.4% C. 47.7% D. 2.3%
D
14. Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is 400 or more? A. 97.7% B. 95.4% C. 47.7% D. 2.3%
B
15. Demand is modeled with a normal distribution that has a mean of 300 and a standard deviation of 50. What is the probability that demand is between 200 and 400? A. 97.7% B. 95.4% C. 47.7% D. 2.3%
C
16. The inputs to the newsvendor model include all of the following except: A. underage cost. B. overage cost. C. fixed cost. D. demand forecast.
C
17. The _____________ is the cost of ordering one unit _____________. A. underage cost, exactly B. overage cost, exactly C. underage cost, too few D. overage cost, too few
D
18. The _____________ is the cost of ordering one unit _____________. A. underage cost, exactly B. overage cost, exactly C. underage cost, too many D. overage cost, too many
D
19. Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives an 80% discount for its bread at the end of the day. What is the overage cost? A. $1.50 B. $0.50 C. $0.40 D. $0.10
A
20. Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives an 80% discount for its bread at the end of the day. What is the underage cost? A. $1.50 B. $0.50 C. $0.40 D. $0.10
A
21. Bakery A sells bread for $2 per loaf that costs $0.80 per loaf to make. Bakery A gives a 75% discount for its bread at the end of the day. What is the critical ratio? A. 0.80 B. 0.71 C. 0.29 D. 0.20
A
22. Bakery A sells bread for $2 per loaf that costs $0.80 per loaf to make. Bakery A gives a 75% discount for its bread at the end of the day. Demand for the bread is normally distributed with a mean of 300 and a standard deviation of 30. What order quantity maximizes expected profit for Bakery A? A. 325.25 B. 324.00 C. 306.00 D. 300.17
C
23. Which of the following statement is TRUE regarding the optimal order quantity that maximizes expected profit? A. It always is equal to the mean of the demand distribution. B. It is a balance between the salvage value and the underage cost. C. It is a balance between the underage cost and overage cost. D. More should be ordered when the overage cost exceeds the underage cost.
B
24. Which of the following is NOT a performance measure of the newsvendor model that you learned in this chapter? A. Expected sales B. Expected supply C. In-stock probability D. Stockout probability
A
25. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 150 and a standard deviation of 60. What is its expected inventory if Store A's order quantity is 90 units? A. 5 B. 10 C. 50 D. 65
D
26. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 200. What is its expected sales if Store A's order quantity is 400 units? A. 260 B. 262 C. 340 D. 360
B
27. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 250. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5. What is its expected profit if Store A's order quantity is 400 units? A. $4063 B. $6560 C. $8560 D. $10,560
B
28. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. What is its in-stock probability if Store A's order quantity is 800 units? A. 97.7% B. 84.1% C. 15.9% D. 2.3%
C
29. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. What is its stockout probability if Store A's order quantity is 800 units? A. 97.7% B. 84.1% C. 15.9% D. 2.3%
B
30. Which of the following statements is FALSE regarding in-stock probability? A. In-stock probability is equal to the critical ratio when expected profit is maximized. B. In-stock probability is greater than the critical ratio when expected profit is maximized. C. In-stock probability is a measure of customer service. D. In-stock probability has a value between 0 and 1.
B
31. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. How many units should be ordered to achieve a 99.7% in-stock probability? A. 1310 B. 1340 C. 1650 D. 1695
A
32. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $20. Inventory is salvaged for $5. Which of the following statements is TRUE if Store A increases its in-stock probability from 98% to 99%? A. Expected profit decreases. B. Order quantity decreases. C. Order quantity remains unchanged. D. Expected profit increases.
A
33. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $20. Inventory is salvaged for $5. Which of the following statements is TRUE if Store A increases its in-stock probability from 98% to 99%? A. Expected inventory increases. B. Order quantity remains the same. C. Order quantity decreases. D. Expected inventory decreases.
C
36. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $30. Inventory is salvaged for $5. What is its expected profit if Store A's order quantity is 525 units? A. $10,000 B. $7815 C. $7185 D. $2815
A
37. Demand for its product is normally distributed with a mean of 50 and a standard deviation of 10. What is the coefficient of variation of its demand forecast? A. 0.2 B. 5 C. 10 D. 50
D
39. The relative consequence of mismatch costs in the newsvendor model is small if demand uncertainty is ____________ or critical ratio is ______________. A. high, high B. high, low C. low, low D. low, high
C
40. Store A uses the newsvendor model to manage its inventory. Demand for its product is normally distributed with a mean of 500 and a standard deviation of 300. Store A purchases the product for $10 each unit and sells each for $25. Inventory is salvaged for $5. What is its maximum profit? A. $12,500 B. $8000 C. $7500 D. $5000
A
41. The difference between the __________ and _____________ is the mismatch costs in the newsvendor model. A. maximum profit, expected profit B. maximum profit, expected sales C. minimum profit, expected profit D. minimum profit, expected sales
B
42. Mismatch costs are the sum of the costs of _________ and ___________. A. stockouts, work-in-process inventory B. stockouts, leftover inventory C. overstock, leftover inventory D. overstock, work-in-process inventory
B
43. Expected profit ________ as the coefficient of variation _________. A. increases, stays the same B. decreases, increases C. decreases, decreases D. stays the same, increases
C
44. Expected profit _________ as the critical ratio ____________. A. increases, stays the same B. decreases, increases C. decreases, decreases D. stays the same, increases
A
45. Maximum profit is computed as the product of ___________ and ___________. A. expected demand, profit per unit sold B. actual demand, unit selling price C. expected demand, unit selling price D. actual demand, profit per unit sold
B
47. Coefficient of variation is the ratio of the _______ to ___________. A. maximum profit, expected demand B. standard deviation of demand, expected demand C. maximum profit, expected profit D. standard deviation of demand, expected profit
B
48. The factors that influence mismatch costs are ___________ and ____________. A. critical ratio, coefficient of correlation of demand B. critical ratio, coefficient of variation of demand C. overage cost, coefficient of correlation of demand D. overage cost, coefficient of variation of demand
C
49. Which of the following statements is TRUE regarding the coefficient of variation of demand? A. It is an absolute measure of demand uncertainty. B. Its value is always between -1 to 1. C. Its value is always greater than or equal to 0. D. Its value is always between 0 and 1.
D
50. Which of the following is NOT a way to manage a newsvendor product that has substantial mismatch costs? A. Increase underage costs relative to overage costs B. Reduce demand uncertainty C. Pool similar products D. Increase product variety
D
51. __________ is a statistical measure of the interaction between two uncertain events. A. Variation B. Range C. Standard deviation D. Correlation
A
52. Two events are __________ if when the outcome of one event is high, then the outcome of the other event is also high. A. positively correlated B. uncorrelated C. negatively correlated D. independent
B
53. Which of the following is TRUE about correlation? A. Correlation has a value in between zero and one. B. Two independent events will have a zero correlation. C. Product pooling is most effective if the correlation between two products is one. D. A product with a high demand uncertainty has a high correlation
C
54. The capability to respond to updated _____________ information is called __________ response. A. supply, slow B. supply, quick C. demand, quick D. demand, slow
B
55. The capacity that allows a firm to react to changes in its ____________ is called __________ capacity. A. demand forecast, proactive B. demand forecast, reactive C. supply forecast, proactive D. supply forecast, reactive
A
56. Which of the following statements is FALSE regarding a make-to-order system? A. It is the opposite of mass customization. B. The production of a unit begins only when its demand is known. C. It does not have leftover inventory. D. It helps to reduce mismatch costs.
B
57. Product pooling _________ demand across correlated products to __________ coefficient of variation, thereby reducing mismatch costs. A. aggregates, increase B. aggregates, decrease C. segregates, increase D. segregates, decrease
C
58. Product pooling is more effective with products whose demands are __________. A. positively correlated B. uncorrelated C. negatively correlated D. known in advance
C
59. ____________ is an effective strategy to manage mismatch costs by increasing the ____________ of a firm's production process. A. Quick response, variability B. Pooling, variability C. Quick response, flexibility D. Pooling, flexibility
A
60. Make-to-order systems are effective in environments with the following characteristics EXCEPT: A. critical ratio is high. B. critical ratio is low. C. customers prefer variety. D. customers are willing to wait.
B
7. Bakery A sells bread for $2 per loaf that costs $0.50 per loaf to make. Bakery A gives a 70% discount for its bread at the end of the day. What is the salvage value of its bread? A. $2.00 B. $0.60 C. $0.50 D. $0.10
B
9. The _________ function returns the ____________ a given outcome occurs. A. density, frequency B. density, probability C. distribution, probability D. distribution, frequency
B
Among the four products given below, which is most likely to have the lowest mismatch costs expressed as a percentage of maximum profit? A. Product A B. Product B C. Product C D. Product D
