Chapter 13

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A risk avoider would want ______ safety stock.

decreases lead time variability.

The need for safety stocks can be reduced by an operations strategy which:

-Cost of ordering too many. -Running out and losing profits.

The newsvendor model balances which two costs (choose all that apply)?

True

The newsvendor model works well for perishable products.

False

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

True

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

True

The rate of demand is an important factor in determining the ROP.

True

To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: when to order and how much to order.

True

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

are subject to deterioration and spoilage

Dairy items, fresh fruit, and newspapers are items that:

fixed order intervals.

In a supermarket, a vendor's restocking the shelves every Monday morning is an example of:

True

Interest, insurance, and opportunity costs are all associated with holding costs.

True

One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.

Optimal probability of running out.

The basic calculation in the newsvendor model will result in a calculation of:

20 cases

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs). Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer.

True

Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.

True

Variability in demand and/or lead time can be compensated for by safety stock.

Reduced lead times

Which of the following interactions with vendors would potentially lead to inventory reductions?

Quantity discounts are available.

Which of the following is not one of the assumptions of the basic EOQ model?

purchase cost

Which of the following is typically the largest of all inventory costs?

purchase cost

Which one of the following is not generally a determinant of the reorder point?