OPM-Chapter 12

Which is the correct formula for the total cost in the quantity discount model?

(Q/2)H + (D/Q)S + PD

Which statement about holding costs, also known as carrying costs, are correct? (Select all that apply.)

-Carrying costs can be stated as a percentage of item price, -Carrying costs can be stated as a constant.

Which of the following statements about inventory management is/are true?

-Inventory managers must decide how much to order. -One of the goals is to keep inventory costs within reasonable bounds. -One of the goals is to achieve good customer service.

Which of the following statements about the fixed-order-interval model is/are true?

-It can produce savings in shipping costs. -The order point is fixed.

Which of the following statements about the single-period model is/are true?

-It minimizes costs of shortage and excess. -It is used for ordering items that have a limited lifespan.

Which of the following statements about the A-B-C approach is/are true?

-Its purpose is to identify inventory items that are the most important to the business. -It is intended to help firms allocate control efforts based on the relative importance of items in inventory. -Approximately 10% to 20% of items account for about 60% to 70% of annual dollar value.

Which of the following are assumptions of the EOQ model?

-Lead time is known. -Annual demand is known.

Which of the following statements about inventory costs is/are true?

-Ordering and setup costs are treated the same. -Holding costs can include the cost of insurance.

Which of the following statements about the EOQ model is/are true?

-Orders are placed when there is just enough inventory left to cover the lead time demand. -The EOQ minimizes the sum of annual ordering and holding costs.

Which of the following statements about reorder point ordering is/are true?

-Safety stock is required if lead time is variable. -Safety stock is required if demand is variable.

Which of the following statements about inventory control systems is/are true?

-Some businesses are moving towards using RFID tags to track inventory. -Orders in two-bin systems may not be placed at the right time.

Which of the following statements about quantity discount models is/are true?

-Total cost must include product cost to evaluate options. -The optimal quantity may not be the same as the EOQ.

Which of the following are assumptions in the economic production quantity (EPQ) model?

-Usage occurs continually, but production occurs periodically. -Only one product is involved.

Which of the following is/are the basic issue/s of inventory management?

-When to order -How much to order

What are the key questions for management concerning cycle counting? (Select all that apply.)

-Who should count it? -When should cycle counting be performed? -How much accuracy is needed?

If annual demand is 10,000 units and 9,000 units of demand was filled directly from inventory, with shortages totaling 1,000 units, the annual fill rate is ______.

90%

The ______ approach classifies inventory items according to a measure of importance, such as annual dollar value.

A-B-C

Which of these is NOT a factor that determines the appropriate amount of safety stock?

Average quantity discount

In the single-period model, _______cost is the unrealized profit per unit, while ______cost is the difference between the purchase price and salvage value of an item.

Blank 1: shortage Blank 2: excess

When carrying costs are expressed as a percentage of price, what happens to carrying costs as the quantity discount increases?

Carrying costs per unit decline

Which of the following should an operations manager do if they are using discrete stocking levels?

Choose the stocking level so that the desired service level is equaled or exceeded.

Which of the following is the correct formula for the service level in the single period model with continuous stocking levels?

Cs/Cs+Ce

______ stock is the amount of inventory required to meet expected demand.

Cycle

______ is a physical count of items in inventory used to reduce the discrepancies between inventory records and the actual items on hand.

Cycle counting

One reason firms carry inventory is to ______, that is, to use inventory as a buffer between successive internal operations to avoid disruption in the event of equipment breakdowns or accidents.

Decouple operations

Which of the following is not a way inventory affects performance measures?

Dividends

What varies in a fixed-order-interval (FOI) model?

The amount of each order

Which is the definition of holding cost in the EOQ model?

The cost to carry a single unit in inventory for a length of time.

Which of the following is not a reason for using the fixed-order-interval model?

The firm desires to minimize inventory requirements.

What is the definition of ordering cost?

The fixed cost of placing and receiving a single order.

What does 'z' represent in the safety stock formula?

The stockout risk a manager is willing to accept

If both the demand rate and lead time are constant, how do the fixed-interval model and the fixed-quantity model compare?

They function identically

Which of the following is true of the universal product code (UPC) and point-of-sale (POS) system?

They give continuous information in inventories.

Which of the following is NOT a normal function of inventory?

To provide an investment vehicle.

Which of the following is NOT a normal function of inventory?

To take advantage of existing storage space.

Which of the following are considered types of inventory in a manufacturing facility?

Tools and supplies Raw materials Finished goods Work-in-process Maintenance and repairs

Which of the following statements about inventory turnover is not true?

Turnover is the ratio of sales to inventory.

For a given order cycle service level, when is it required to have more safety stock?

When the demand rate is unpredictable When the lead time is variable

Inventory _______or _______ of goods.

amount , storage

The overall objective of inventory management is to achieve satisfactory levels of ______ while keeping inventory ______ reasonable.

customer service; costs

Which is the correct formula for the reorder point with no variability?

d x LT

In order to rank inventory items in an A-B-C analysis, we arrange annual dollar values for all items in:

descending order.

True or false: Many of the items that a firm stocks in inventory are generic regardless of the kind of business it engages in.

false

In the economic production quantity (EPQ) model, the larger the production run size, the ______ the number of runs needed per year, and the _______ the annual setup cost.

fewer; lower

Because firms tend to have about 30 percent of current assets invested in inventory, a reduction in inventories can result in a significant ______.

increase in ROI

The inventory models in this chapter relate primarily to ______ items, that is, items that are ready to be sold or used.

independent-demand

How much to order, and when to order, are the two basic issues in an _______.

inventory ordering policy

is the ratio of average cost of goods sold to average inventory investment.

inventory, turnover

MRO stands for ______ inventory.

maintenance and repairs

________ inventory systems take physical inventory counts at fixed intervals and decide how much to reorder of each item.

periodic

The service_______,______ is the percentage of demand filled by the inventory on hand.

service , level

In the economic production quantity (EPQ) model, Blank______ costs are analogous to ordering costs.

setup

One of the reasons a firm carries inventory is to ______, that is, to achieve constant output and use inventory to meet overly high requirements during seasonal periods.

smooth production requirements

True or false: Differences between the fixed-order interval and fixed-quantity model only become apparent when variability exists in demand or lead time.

true

Which of the following types of inventory are items that are ready to be sold?

Independent-demand items

Which statement is true for the economic production quantity (EPQ) model?

It is used when production occurs in batches.

In a fixed-order-interval model, larger-than-expected demand causes which of the following situations to occur?

Larger order size than expected

What does LT represent in the reorder point formula?

Lead time

Which of the following is correct regarding inventory monitoring under the fixed-order-interval-model?

Only periodic checks of inventory required

______ inventory systems continuously keep track of changes to the inventory system and a fixed quantity is ordered when the amount on hand reaches a predetermined level.

Perpetual

Which is the correct formula for the total annual cost in the EOQ model?

Q2H+DQS

Which is the correct formula for the economic order quantity?

SQAURE ROOT OF 2DS/H

What does the formula zσdLT represent?

Safety stock given variability in demand during lead time.

In the single-period model, what is the key to determining the optimal stocking level?

Service level