OM Final - Chapter 12
A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is
1/3 as large
Inventory decision rules, "when the inventory level goes down to 14 gearboxes, 100 will be ordered"
14 is reorder point, 100 is quantity
Fixed period inventory model requires more safety stock than the fixed quantity models because
A stockout can occur during the review period as well as during the lead time
Method for dividing hand-on inventory into 3 classifications based on annual dollar inventory
ABC analysis
If demand is not uniform and constant, then stockout risks can be controlled by
Adding safety stock
EOQ is true?
All are true
POQ model is false?
All else equal, the smaller the ratio of demand rate to production rate, the larger is the POQ
Function of inventory
All of the above are
Which of the following are elements of inventory holding costs
All of the above are elements of inventory holding costs
Regarding the reorder point is true
All of the above are true
Among the advantages of cycle counting is that it
Allows more rapid ID of errors and consequent remedial action than is possible with annual physical inventory
ABC analysis if false
Based on the presumption that all items must be tightly controlled to produce important cost savings
Amazon.com is false?
Company was founded as and still is a virtual retailer with no inventory
Purpose of safety stock
Control likelihood of a stockout due to variability of demand during lead time
Continuing reconciliation of inventory with inventory records
Cycle Counting
When demand is constant and lead time is variable, safety stock computation requires three inputs: value of Z, _______, and standard deviation of lead time
Daily Demand
Inventory that separates various parts of the production process
Decoupling
In the production order quantity model, the fraction of inventory that is used immediately and not stored is represented by the ratio of
Demand rate to production rate
Safety stock problem includes parameters for average daily demand, std. devation of demand, and lead time, then _____ is variable and _________ is constant
Demand, Lead Time
Which of the following statements regarding control of service inventories
Effective control of all goods leaving the facility is one applicable technique
System triggers inventory ordering on a uniform time frequency
Fixed-Period
EOQ model with quantity discounts attempts to determine
How many units should be ordered
EOQ is false?
If annual demand were to double, the EOQ would also dobule
Given level of demand annual holding cost is larger as the order quantity
Larger
Statements of quantity discounts is false?
Larger annual demand, the less attractive a discount schedule will be
Time between placement and receipt of order
Lead Time
Not generally be a motive for a firm to hold inventories
Minimize holding costs
In an EOQ, the total annual cost curve is at its ______ where holding costs equal setup costs
Minimum
Not an assumption of the EOQ
Production and use can occur simultaneously
Material that is usually purchased but has yet to enter the manufacturing process
Raw material
In a quantity discount problem, if the savings in product cost is smaller than the increase in the sum of setup cost and holding cost, the discount should be
Rejected or refused
Following statements regarding the production order quantity model is true?
Relaxes the assumption that all the order quantity is received at one time
Model gives satisfactory answers even with substantial variations in its parameters
Robust
Extra stock that is carried to serve as a buffer
Safety stock
Not one of the four main types of inventory
Safety stock inventory
Complement of the probability of a stockout
Service level
Proper quantity of safety stock is typically determined by
Setting the level of safety stock so that a given stockout risk is not exceeded
Disadvantage of the fixed period inventory system
Since there is no count of inventory during the review period, a stockout is possible
An advantage of the fixed-period system is that
There is no physical count of inventory items when an item is withdrawn
Amazon's concept of operating without inventory now a leader in
Warehouse management and automation
ABC analysis divides hand on inventory into three classes based upon
annual dollar volume
In the basic EOQ model, if the cost of placing an order doubles and all other variables remain constant, EOQ will
increase by 41%
A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is
increased by less than 50%
If the actual order quantity if the economic order quantity in a problem that meets the assumptions of the EOQ the average amount of inventory on hand
is 1/2 of the EOQ
All of the following statements about ABC analysis are true except
it states that all items require the same degree of control
Primary purpose of the basic EOQ model
minimize the sum of setup and holding cost
When quantity discounts are allowed, the cost-minimizing order quantity
minimizes the sum of holding, ordering and product costs
Category of inventory holding costs is higher than average for rapid-changing industries such as PCs and cell phones
pilferage, scrap and obsolescence
Cycle counting
provides a measure of inventory accuracy
ABC analysis is based upon the principle that
there are usually a few critical items and many items are less critical
Two most basic inventory questions answered by the typical inventory model are
timing and quantity of orders
Most inventory models attempt to minimize
total inventory based costs