Chapter 9

obsolescence

A form of shrinkage called _______ occurs when inventory cannot be used or sold at full value, owing to model changes, engineering modifications, or unexpectedly low demand.

inventory records are always current

A perpetual inventory system requires that:

stock-keeping unit (SKU)

An individual item or product that has an identifying code and is held in inventory somewhere along the supply chain is called:

Increasing repeatability

Lewis Machine Tools is considering reducing lot size to reduce cycle inventory. Which of the following is a change that should be made for lot size reduction to be effective?

ABC analysis allows the company to control inventory shrinkage. IS TRUE: ABC analysis uses the Pareto chart concept, generally, the class A items account for approximately 80 percent of the dollar usage, inventory items are ranked on the basis of dollar usage.

Lisa's Card Cache uses ABC analysis. Which of the following statements is NOT true of ABC analysis?

match demand rate with production rate

The primary lever to reduce anticipation inventory is to:

204

The production demand for widgets for a 250-workday year is 7,500 units. Ordering costs are $25.00 per order and holding costs are $9.00 per unit per year. Four days must be allowed between order placement and order receipt. What is the EOQ, assuming known and constant variables?

Inventory transportation costs. IS: inventory storage costs, inventory handling costs, inventory shrinkage costs.

Which of the following costs is NOT considered an inventory holding (or carrying) cost?

the cost of insurance. IS: cost of placing an order, potential to reduce stock outs, the need to increase machine utilization.

Which of the following is NOT considered a pressure to hold large inventories?

dependent demand

______ items, consisting of raw materials and work-in-process inventories, are those items whose required quantity varies with the production plans for other items held in the firm's inventory.

high cost of capital

Which of the following can put pressure on a company to carry small levels of inventory?

reduce the lot sizes

What is the primary lever to reduce cycle inventory?