ISDS 3115 chapter 12

True

True or False: 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.

True

True or False: The reorder point is the inventory level at which action is taken to replenish the stocked item.

True

True or False: In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

False

True or False: Safety stock in inventory systems depends only on the average demand during the lead time.

True

True or False: Service level is the complement of the probability of a stockout.

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

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

A) furniture

A single-period inventory model is NOT applicable for A) furniture B) milk C) seasonal goods D) newspapers

a probalistic model

A statistical model applicable when product demand or any other variable is not known but can be specified by means of a probability distribution is referred as

a perpetual inventory system

A system that keeps track of each withdrawal or addition to inventory continuously is

a fixed-period system

A system that triggers ordering on a uniform time basis is called

B) annual dollar volume

ABC analysis divides on-hand inventory into three classes, generally based upon which of the following? A) annual demand B) annual dollar volume C) item quality D) unit price E) the number of units on hand

shortage cost / (overage cost + shortage cost)

For seasonal products, the service level should be set to equal

is one-half of the economic order quantity

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:

cost per unit - salvage value per unit

In a single period inventory model, the overage cost is

either independent of or dependent on the demand for other items

Inventory control models assume that demand for an item is

D) increasing stockroom accessibility

Inventory record accuracy would be decreased by A) ABC analysis B) cycle counting C) reorder points D) increasing stockroom accessibility

total inventory-based costs

Most inventory models attempt to minimize

to provide a hedge against inflation

One use of inventory is

fixed quantity; fixed period

Q is to _______ systems as P is to _________ systems.

E) B and D

Service level is: A) something that should be minimized in retail B) the probability of not stocking out C) the probability of stocking out D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage) for single-period models E) B and D

choosing the level of safety stock that assures a given service level

The appropriate level of safety stock is typically determined by

strike a balance between inventory investment and customer service

The objective of inventory management is to

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

The purpose of safety stock is to:

timing of orders and order quantity

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

Raw materials inventory

What inventory describes inventory that has been purchased but not processed?

single-period inventory model

What is a system for ordering items that have little or no value at the end of a sales period?

setup cost

What is the cost to prepare a machine or process for production?

pilferage, scrap, and obsolescence

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

D) order processing

Which of the following does NOT belong to holding costs? A) insurance on inventory B) pilferage, scrap, and obsolescence C) storage costs D) order processing

D) interest payments

Which of the following does NOT belong to ordering costs? A) clerical support B) cost of supplies C) order processing D) interest payments

A) Production and use can occur simultaneously

Which of the following is NOT an assumption of the economic order quantity model shown below? Q* = SQRT(2DS/H) A) Production and use can occur simultaneously B) The only variable costs are setup cost and holding (or carrying cost) C) Quantity discounts are not possible D) Demand is known, constant, and independent E) Lead time is known and constant

Lead times are variable

Which of the following is NOT one of the assumptions of fixed-period system? A) Lead times are variable B) Lead times are known C) Items are independent of one another D) the only relevant costs are the ordering and holding costs

E) All of the above are functions of inventory

Which of the following is a function of inventory? A) to hedge against inflation B) to take advantage of quantity discounts C) to decouple various parts of the production process D) to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand E) All of the above are functions of inventory

C) Perpetual inventory system

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

D)MRP

Which of the following is not a type of inventory? A) Finished Goods B) Raw Materials C) work in process D) MRP

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

Which of the following statements about ABC analysis is FALSE? A) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items B) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings C) In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C" items have. D) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can determine item classification in ABC analysis

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

Which of the following statements about the basic EOQ model is FALSE? A) If annual demand were to double, the number of order per year would increase B) If annual demand were to double, the EOQ would also double C) If the ordering cost were to increase, the EOQ would rise D) If the setup cost were to decrease, the EOQ would fall. E) All of the above statements are true.

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

Which of the following statements regarding control of service inventories is TRUE? A) Effective control of all goods leaving the facility is one applicable technique B) Service inventory needs no safety stock, because there's no such thing as a service stockout C) Service inventory has carrying costs but not setup costs D) Good personnel selection, training, and discipline are easy E) Service inventory is a fictional concept, because services are intangible

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

Which of the following statements regarding the production order quantity model is TRUE? A) it relaxes the assumption that the demand rate is constant B) It applies only to items produced in the firm's own production departments C) It minimizes inventory D) It relaxes the assumption that all the order quantity is received at one time E) It minimizes the total production costs

E) All of the above are true

Which of the following statements regarding the reorder point is TRUE? A) The reorder point is that quantity that triggers an action to restock an item B) there is a reorder point even if lead time and demand during lead time are constant C) A shorter lead time implies a smaller reorder point D) The reorder point is larger than d x L if safety stock is present E) All of the above are true

D) to minimize holding costs

Which of the following would NOT generally be a motive for a firm to hold inventories? A) to decouple various parts of the production process B) to hedge against inflation C) To take advantage of quantity discounts D) To minimize holding costs