Product and Operations Chapter 13

T/F The objective of inventory management is to minimize the cost of holding inventory.

False

If average demand for an inventory item is 200 units per day, lead time is three days, and safety stock is 100 units, the reorder point is? A. 100 Units. B. 200 Units. C. 300 Units D. 600 Units E. 700 Units

700 units

In the A-B-C classification system, items which account for 60 percent of the total dollar volume for few inventory items would be classified as: A. A items B. B items C. C items D. A items plus B items E. B items plus C items

A items

With the A-B-C system, an item that had a high demand but a low annual dollar volume would probably be classified as: A. A B. B C. C

C item

In the A-B-C classification system, items which account for 15 percent of the total dollar volume for a majority of the inventory items would be classified as: A. A items B. B items C. C items D. A items plus B items E. B items plus C items

C items

T/F Because price is not a factor in the EOQ formula, Quantity discount will not affect EOQ calculations.

False

T/F EOQ inventory models are basically concerned with the timing of orders.

False

T/F In the A-B-C approach, C items typically represent about 15 percent of the number of items, but 60 percent of the dollar usage.

False

T/F In the EOQ formula, holding costs under 10 percent are expressed as percentages, above 10 percent are expressed as annual unit costs.

False

T/F In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total curves will have the same EOQ for each curve.

False

Which of the following interactions with vendors would potentially lead to inventory reductions? A. Reduced lead time B. increased safety stock C. less frequent purchases D. Larger batch quanities E. longer order intervals

Reduced lead time

Even thought it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances. A. Foreorder costs B. Service costs C. Shortage costs D. Holding costs E. setup costs

Shortage cost

T/F The EOQ should be regarded as an approximate quantity rather than an exact quantity. thus, rounding the calculated value is acceptable.

True

T/F The basic EOQ model ignores the purchasing cost.

True

T/F The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

True

T/F The total cost Curve is relatively flat near the EOQ.

True

T/F The two main concerns of inventory control relate to the costs and the level of customer service.

True

T/F in the single period model, the service level is the probability that demand will not exceed the stocking level in any period.

True