SCM CH7

The optimal order quantity for the quantity discount model may exist at a price breakpoint

True

The term Cycle Counting is synonymous with physically counting inventory

True

When demand and lead time are constant, reorder point is the demand during lead time.

True

The four broad categories of inventory are raw materials, work-in-process, subassemblies, and finished goods

False

The cost of a widget is $5, and the carrying rate is 40%; cost of processing an order is $25, annual demand is for 400 widgets, and supply and usage patterns are stable. What is the economic order quantity (EOQ)? a. 5 b. 20 c. 25 d. 100 e. 200

d. 100

Pareto Analysis is an inventory model used to determine the optimal order size that minimizes total annual inventory costs

False

Dependent Demand must be forecasted based on market conditions

False

In the Economic Manufacturing Quantity model, the annual consumption rate must be higher than the annual production rate

False

Inventory turnover ratio shows how many times a firm turns over its inventory in an accounting period. Faster turnovers are generally viewed as negative because it indicates instability in the firm's inventory level

False

. Dependent demand and independent demand items differ in that I. for any product, all components are dependent-demand items II. the need for independent-demand items is forecast III. the need for dependent-demand items is calculated

I, II & III

Radio Frequency Identification (RFID) is considered an eventual replacement of bar code because of its ability to store huge amounts of information to differentiate goods at the item level

True

Relaxing the instantaneous replenishment assumption of the EOQ model results in the Economic Manufacturing Quantity model

True

Use this information below to calculate the optimal order quantity: Annual demand for backpacks is 43,000 units The cost to place an order is $220 The per unit cost of the item is $60.00 The annual holding rate is 37.5% Choose the closest answer. a. 920 units b. 250 units c. 710 units d. 830 units

a. 920 units

Which of the following is a disadvantage of excessive inventory? a. it creates an unnecessary waste of scarce resources. b. It leads to higher inventory ordering cost. c. It leads to lower average inventory. d. It eliminates cycle stock. e. It reduces the need to conduct cycle count.

a. it creates an unnecessary waste of scarce resources.

Which of the following would most likely be considered a dependent demand item? a. Bicycle tires used to assemble a bicycle b. Television (TV) c. Couch d. Lawn Mower

a.Bicycle tires used to assemble a bicycle

Companies hold a supply of inventory for all of the following reasons EXCEPT: a. meet variation in product demand b. increase production change/setup costs c. allow production scheduling flexibility d. purchase in bulk to take advantage of quantity discounts e. maintain independence of operations (Decoupling)

b. increase production change/setup costs

Which of the following is a global RFID challenge? a. Foreign firms are skeptical about sharing potentially confidential information with foreign businesses. b. Globally, the RFID industry does not have its own UHF spectrum allocation. c. UHF signals are reflected by metal and absorbed by water. d. All of the above. e. None of these.

d. All of the above.

Which of the following is not an example of an ordering cost for products purchased from a supplier? a. the cost of transmitting the order b. the cost of receiving the product c. the cost associated with processing the invoice d. the cost of pilferage while in storage e. the cost of clerical staff for preparing the purchase

d. the cost of pilferage while in storage

The primary purpose of the basic economic order quantity model is a. to calculate the reorder point, so that replenishments take place at the proper time b. to minimize the sum of carrying cost and holding cost c. to maximize the customer service level d. to minimize the sum of setup cost and holding cost e. to calculate the optimum safety stock

d. to minimize the sum of setup cost and holding cost

Which of the following cannot be considered as independent demand items? a. wholesale and retail merchandise items b. maintenance, repair, and operating supplies at a manufacturing company c. maintenance, repair, and operating supplies at a service firm d. raw material items that become part of the final product at a manufacturing firm

d.raw material items that become part of the final product at a manufacturing firm