SCM: Chapter 7

Use the information below to calculate the number of orders per year when using the EOQ:

b. 49

Which of the following would be considered a dependent demand item?

c. Bicycle tires used to assemble a bicycle

Which of the following would refer to the 80/20 rule when applied to the ABC inventory control system?

a. 80 percent of the total annual $ usage is accounted for, by 20 percent of the items.

When demand and delivery lead time are known and constant, daily demand = 8, purchase lead time = 5 days, and the purchase price = $20/unit, then the reorder point is:

e. 40

The cost of a product is $5, and the carrying cost rate is 20%; the cost of processing an order is $45 and the annual demand is 1000. What is the economic order quantity (EOQ)?

c. 300

Which of the following is TRUE regarding the EOQ figure below?

d. The EOQ is at lot size G, and curve K is the annual holding cost curve.

The inventory turnover ratio shows how efficiently a firm is using its inventory to generate revenue.

a. true

The College Bookstore sells a unique calculator to college students. The demand for this calculator has a normal distribution with an average daily demand of 20 units and a standard deviation of 4 units per day. The lead time for this calculator is 9 days. Compute the statistical reorder point that results in a 95 percent in-stock probability. Choose the closest answer.

b. 200 units

The ABC inventory control prioritizes dependent demand inventory items into three groups, A, B, and C. A items receive the smallest amount of safety stock, while C items typically have the most safety stock. a. True b. False

b. False

The four categories of inventory are raw materials, intermediate assemblies, work-in-progress and finished goods.

b. False

If an item is ordered using its economic order quantity, the annual carrying cost should be:

b. equal to the annual ordering cost

Classify the following inventory items as either A, B, or C items using the ABC inventory control system:

b. item 1 (C), item 2 (A), item 3 (C), item 4 (B), item 5 (C)

If at the end of the year, the cost of revenue = $2,500, total revenue = $12,000 and inventory value = $2,000, the inventory turnover ratio would be:

c. 1.250

Which of the following is NOT an assumption of the economic order quantity (EOQ) model?

c. Production and use occur simultaneously.

Which one of the following is NOT a reason for firms to carry inventory?

c. To increase production change/setup costs

If your company had an annual purchase cost of items equal to $2,000,000, an annual holding cost of $150,000 and an annual ordering cost of $50,000 this scenario would reveal that:

c. Your order lot size was higher than the EOQ

The College Bookstore sells a unique calculator to college students. The demand for this calculator is constant at 20 units per day. The lead time for this calculator is variable at an average of 9 days with a standard deviation of 2 days. Compute the statistical reorder point that results in a 95 percent in-stock probability. Choose the closest answer.

d. 246 units

Which of the following is true under the Periodic Review System?

d. a higher level of safety stock is needed to buffer against uncertainty in demand over a longer planning horizon, compared to the EOQ system

The primary purpose of the basic economic order quantity (EOQ) model is to:

e. None of these choices are correct

Which of the following is a disadvantage of carrying too much inventory?

e. it creates an unnecessary waste of scarce resources