MAR3203 Chapter 12
Which of the following should be higher in P systems than Q systems? Order size Lead time Demand Safety stock
Safety stock
A system that triggers ordering on a uniform time basis is called a fixed-period system. a reorder point system. an EOQ. a fixed-quantity system.
a fixed-period system.
A system that keeps track of each withdrawal or addition to inventory continuously is __________. a fixed-period inventory system a perpetual inventory system a continuous inventory system a fixed-quantity system
a perpetual inventory system
An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true? 100 is the lead point, and 14 is the safety stock. 100 is the reorder point, and 14 is the order quantity. 14 is the reorder point, and 100 is the order quantity. 14 is the safety stock, and 100 is the reorder point.
14 is the reorder point, and 100 is the order quantity.
A production facility is trying to determine the best batch size for an item that is produced intermittently. This item has an annual demand of 1,000 units, an annual carrying cost of $10 per unit, and a setup cost of $400. They operate 50 weeks per year, and can produce 40 units per week. What is the best batch size for this item? 65 283 400 800
400
What is a system for ordering items that have little or no value at the end of a sales period? A. production order quantity model B. ROP C. EOQ D. single-period inventory model
D. single-period inventory model
Generally, inventory types are divided into four main categories. Which of the following is not one of the four main categories of inventory? Maintenance/repair/operating inventory Work-in-process inventory Safety stock inventory Raw material inventory
Safety stock inventory
Which of these conditions is not necessary for the economic order quantity model to be valid? The item has a constant purchase price. The item has a constant demand. The item has a constant lead time. The item has a constant order cost
The item has a constant purchase price.
A disadvantage of the fixed-period inventory system is that: a stockout is possible. it involves higher ordering costs than fixed-quantity inventory systems. additional inventory records are required. the average inventory level is decreased.
a stockout is possible.
If demand is not uniform and constant, the stockout risks can be controlled by __________. placing an extra order raising the selling price increasing the EOQ adding safety stock
adding safety stock
ABC analysis generally divides on-hand inventory into three classes based upon annual demand. item quality. annual dollar volume. unit price.
annual dollar volume.
The appropriate level of safety stock is typically determined by minimizing the expected stockout costs. carrying sufficient safety stock so as to eliminate all stockouts. choosing the level of safety stock that assures a given service level. taking the square root of the economic order quantity.
choosing the level of safety stock that assures a given service level.
In the probabilistic model, increasing the service level will __________. increase the cost of the inventory policy have no impact on the cost of the inventory policy reduce the cost of the inventory policy have an indeterminate impact on the cost of the inventory policy
increase the cost of the inventory policy
Inventory record accuracy would be decreased by: using ABC analysis increasing reorder points using cycle counting increasing stockroom accessibility
increasing stockroom accessibility
Cycle counting: assumes that all inventory records must be verified with the same frequency provides a measure of inventory turnover is a process by which inventory records are verified for accuracy assumes that the most frequently used item must be counted more frequently
is a process by which inventory records are verified for accuracy
The production order quantity model is appropriate when units are produced and sold simultaneously. uses ordering cost, not setup cost, in its formula. results in larger average inventory than an equivalent EOQ model. relaxes the assumption of known and constant demand. assumes instantaneous delivery
is appropriate when units are produced and sold simultaneously.
Inventory management policies based on ABC analysis might include investing extra care in forecasting for C items. the most time verifying the accuracy of records for B items. more in inventory security for C items. more in supplier development for A items.
more in supplier development for A items.
Extra units that are held in inventory to reduce stockouts are called __________. just-in-time inventory demand variance safety stock reorder point
safety stock
The difference between the basic Economic Order Quantity (EOQ) model and the production order quantity model is that: there are no holding costs in the production order quantity model. the production order quantity model does not require the assumption of a known, constant demand. the economic order quantity model does not require the assumption of known, constant lead time. the production order quantity model does not require the assumption of instantaneous delivery.
the production order quantity model does not require the assumption of instantaneous delivery.
The primary purpose of the basic economic order quantity model shown below is to maximize the customer service level. to calculate the optimum safety stock. to minimize the sum of setup cost and holding cost. to calculate the optimum reorder point.
to minimize the sum of setup cost and holding cost.
One use of inventory is __________. to ensure that item cost is maximized to tightly link production and distribution processes to provide a hedge against inflation to tightly link a firm's production with its customers' demand
to provide a hedge against inflation
Most inventory models attempt to minimize: the number of orders placed total inventory based costs the likelihood of a stockout the number of items ordered
total inventory based costs
The two most important inventory-based questions answered by the typical inventory model are: when to place an order and what is the cost of the order. when to place an order and how many of an item to order. how many of an item to order and with whom the order should be placed. how many of an item to order and what is the cost of this order.
when to place an order and how many of an item to order.