Test 3 Review

If annual demand is 24,000 units, orders are placed every 0.5 months, and the cost to place an order is $50, what is the annual ordering cost?

$1,200

R. C. Barker makes purchasing decisions for his company. One product that he buys costs $50 per unit when the order quantity is less than 500. When the quantity ordered is 500 or more, the price per unit drops to $48. The ordering cost is $30 per order and the annual demand is 7,500 units. The holding cost is 10 percent of the purchase cost. If R. C. orders 500 units each time he places an order, what would the total annual holding cost be?

$1,200

If annual demand is 48,000 units, orders are placed in quantities of 2000 units at a time, and the cost to place an order is $80, what is the annual ordering cost?

$1,920

For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model is 200 units, and the total annual inventory (carrying and setup) cost is $600. What is the inventory carrying cost per unit per year for this item?

$3.00

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the total annual inventory cost for napkins is

$5,000

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity each time an order is placed, then ______ orders are placed during the year.

13

A demand for an item is 40,000 units. The cost to process an order is $40 and the annual inventory holding cost is $3 per item per year. What is the optimal order quantity, given the following price breaks for purchasing the item?

1500

Mary's Flower Boutique needs to ship finished goods from its manufacturing facility to its distribution warehouse. Annual demand for the Flower Boutique is 2000 flowers. Flower Boutique can ship the flowers via regular parcel service (3 days transit time), premium parcel service (1 day transit time), or via public carrier (5 days transit time). What is the average annual transportation inventory for each alternative? A) 19.7, 6.6, 32.9 B) 20, 7, 50 C) 1, 15, 30 D) 25, 46, 99 E) 20, 6.6, 47.0

19.7, 6.6, 32.9

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the average inventory for napkins is:

2,500 boxes

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate over the 365 days that it is open. The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00. If the restaurant orders the economic order quantity then the time between orders (order cycle) is:

29.2 days

If a company carries 13 weeks of supply, what is the inventory turnover?

4

A computer company has annual demand of 20,000. The company operates 250 days per year. They want to determine EOQ for circuit boards which have an annual holding cost (H) of $10/unit, and an ordering cost (S) of $75. The purchasing lead time is 5 days. What is the TC and reorder point ?

400 units, $5,477

The annual demand for a product has been projected at 2,000 units. This demand is assumed to be constant throughout the year. The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost. Currently, the purchase cost is $40 per unit. There are 250 working days per year. Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days. Currently, the company is ordering 500 units each time an order is placed. What should be the reorder point (excluding any safety stock) under the current policy?

48

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate. If the cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00, then the economic order quantity for napkins is:

5,000 boxes

Suppose that a plant manager uses economic batch sizes for production of a product. Suppose further that the setup cost is $50 per batch, the holding cost per unit per year is $10, the annual demand is 30,000 units, the firm operates (and experiences demand) 300 days per year, and the production rate per day is 1000 units. What will be the maximum inventory level that this product ever reaches?

519

Consider a periodic review inventory system with a lead time of two weeks and a review period of seven weeks. If the standard deviation of weekly demand is 200 and the desired cycle-service level is 86%, what should the safety stock equal?

648

A bakery wants to determine how many trays of doughnuts it should prepare each day. Demand is normal with a mean of 5 trays and standard deviation of 1 tray. If the owner wants a service level of at least 95%, how many trays should he prepare (rounded to the nearest whole tray)? Assume doughnuts have no salvage value after the day is complete.

7

Rolf Steps is the production manager for a local manufacturing firm. This company produces staplers and other items. The holding cost is $2 per unit per year. The cost of setting up the production line for this is $25. There are 200 working days per year. The production rate for this product is 80 per day. If the production order quantity is 200 units, what was the daily demand (rounded to the nearest whole unit)?

7

Consider a periodic review system. The target inventory level is 1000 units. It is time to review the item, and the on-hand inventory level is 200 units. How many units should be ordered?

800

For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $100 per order, and annual demand of 15,000 units. The following price schedule applies to the firm's purchases.

812

Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be?

9300

If the EOQ is ordered, which of the following is true? a. Annual ordering cost exceeds annual holding cost b. Annual holding cost exceeds annual ordering cost c. Annual ordering cost is equal to annual holding cost d. The sum of the annual ordering cost plus annual holding e. The annual holding cost curve is decreasing

Annual ordering cost is equal to annual holding cost

Daniel Trumpe has computed the EOQ for a product he sells to be 400 units. However, due to recent events he has a cash flow problem. Therefore, he orders only 100 units each time he places an order. Which of the following is true for this situation A) Annual ordering cost will be lower than annual holding cost. B) Annual ordering cost will be higher than annual holding cost. C) Annual ordering cost will equal annual holding cost. D) Annual ordering cost will be unaffected by the order policy change. E) Nothing can be determined without more information.

Annual ordering cost will be higher than annual holding cost.

Diseconomies of scale occur when a company is operating _______. a. At its best operating level and increases its out put b. At its best operating level and decreases its output c. Below its best operating level and decreases its output d. Above its best operating level and decreases its output e. Below its best operating level and increases its output

At its best operating level and increases its out put

If the costs (S and H) demands (D) are the same, which of the following is not true with regard to the EPQ model as compared to the EOQ model? a. The EPQ model produces a lower total annual cost b. The maximum inventory level is lower under the EPQ model than under the EOQ model c. Both models use the same formula to compute annual ordering cost d. The inventory depletion rate is the same for both models e. Both models use the same formula to compute annual holding cost

Both models use the same formula to compute annual holding cost

How can both the JIT and EOQ inventory theories effectively be reconciled? a. The cant. A firm must choose either one or the other b. By using MRP c. By considering the setup cost as a variable instead of a parameter d. By applying Kanban cards to the EOQ system e. By assuming a finite production rate

By considering the setup cost as a variable instead of a parameter

How can the EPQ model be economically reconciled with just-in- time (JIT) production? a. Reduce annual demand (D) b. Increase annual holding cost per unit (H) c. Decrease ordering (setup) cost (S) d. Increase annual holding cost per unit (H) and decrease ordering cost (S) e. The two cannot be reconciled

Decrease ordering (setup) cost (S)

According to the textbook, one of the fastest-growing trends today is a. Leveraging technology b. PWP c. Focused plants d. Developing a large network of subcontractors e. Developing a large focused distribution chain

Developing a large network of subcontractors

Finished goods in transit to the customer are called what?

Distribution inventory

In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks? A) EOQ / 52 B) EOQ / average weekly demand C) average weekly demand / EOQ D) 52 / EOQ E) (EOQ)(average weekly demand)

EOQ / average weekly demand

Hand tools, lubricants, and cleaning supplies are usually examples of what?

MRO inventory

If a decision tree model is used then the best decision would be to a. Make the large investment b. Make the medium investment c. Make the small investment d. Choose the stable demand

Make the large investment

In general, as the order size increases a. Ordering costs decrease and carrying cost increase b. Ordering costs increase and carrying costs decrease c. Both ordering and carrying costs increase d. Both ordering and carrying costs decrease

Ordering costs decrease and carrying cost increase

What implies that about 20% of the inventory items will account for about 80% of the inventory value?

Pareto's Law

What are purchased items or extracted materials that will transformed into components or products called?

Raw materials inventory

Under a periodic review system, enough inventory must be carried to protect against stockout for the ______ a. Replenishment lead time b. Review period c. Replenishment lead time plus the review period d. Bottleneck cycle time e. Bottleneck cycle time plus the replenishment lead time

Replenishment lead time plus the review period

Solving a decision tree that involves maximizing profit includes _____. a. Using probabilities to calculate expected values for decision points b. Calculating from left to right c. Selecting the decision alternative with the highest expected value d. Calculating expected values for all chance events before considering decision nodes e. Inverting decision nodes

Selecting the decision alternative with the highest expected value

A SKU is a ______ at a _____ geographic location.

Specific item, particular

The concept of diseconomies of scale ___________. a. States that the average cost of a unit produced is reduced when the amount of output increases b. Is not realistic c. Is not valid for regulated industries d. States that beyond a certain point the cost of each additional unit made increases

States that beyond a certain point the cost of each additional unit made increases

The concept of economies of scale ________. a. States that the average cost of a unit produced is reduced when the amount of output increases b. There are inefficiencies within the firm or industry resulting in rising average costs per unit c. Is not valid for regulated industries d. States that beyond a certain point the cost of each additional unit made increases e. States that total revenue increases when capacity increases

States that the average cost of a unit produced is reduced when the amount of output increases

In a periodic review inventory system, how many units are ordered? a. Target inventory level b. Target inventory level - on hand balance c. Max inventory level- min inventory level d. The EOQ e. Average demand during review period + average demand lead time

Target inventory level - on hand balance

If the costs (S and H) demands (D) are the same, which of the following is true with regard to the EPQ model as compared to the EOQ model? a. The lot size under the EPQ model is bigger than under the EOQ model b. The maximum inventory level is higher under the EPQ model than under the EOQ model c. The two models use different formulas to compute annual ordering cost d. The inventory depletion rate is not the same for both models e. Both models use the same formula to compute annual holding cost

The lot size under the EPQ model is bigger than under the EOQ model

Investments in building or purchasing long-term production facilities are inherently risky due to _____. a. Uncertainty in forecasting future demands b. Unexpected changed in interest rates c. Durability of materials d. Corporate mergers e. Rapid technology changes

Uncertainty in forecasting future demands

In inventory management, when discussing customer service we mean: a. Whether the customer is available when the product is b. Whether the product is available regardless if the customer desires it or not c. Whether the product is available when the customer wants it d. Whether the customer wants the available product e. Whether repair of the product is available

Whether the product is available when the customer wants it

A company is deciding where to locate a new warehouse that will receive shipments from three suppliers: 1,3, and 3. The locations of the suppliers (zi, yi) and the annual number of shipments from supplier i (Wi) are provided below: The coordinates for the new warehouse suggested by the center of gravity method are a. X = 311.4 and y = 309.4 b. X =309.4 and y = 311.4 c. X = 291.2 and y = 198.9 d. X = 193.2 and y = 219.4

X =309.4 and y = 311.4

The ranking in ABC inventory analysis is based on what?

annual dollar usage

What costs are considered in the basic EOQ model? A) annual ordering costs + annual holding costs B) annual purchasing costs + annual holding costs C) annual ordering costs + annual holding costs + annual shortage costs D) annual purchasing costs + annual ordering costs + annual holding costs + annual shortage costs E) ordering costs per order + annual holding costs

annual ordering costs + annual holding costs

What costs are considered in the quantity discount model? A) annual ordering costs + annual holding costs B) annual purchasing costs + annual holding costs + annual ordering costs C) annual ordering costs + annual holding costs + annual shortage costs D) annual purchasing costs + annual ordering costs + annual shortage costs

annual purchasing costs + annual holding costs + annual ordering costs

A location analysis has been narrowed down to two locations, A and B. the main factors in the decision will be supply for raw materials, which has a weight of 50 , and labor cost, which has a weight of 50. The ratings for raw materials and labor are: for A, 3 and 4, respectively; for B, 5 and 3, respectively. Using the factor rating method, the manager should ______:

choose location B

What are two logical ways in which to base the time between orders in a periodic review system? A) replenishment lead time or EOQ calculations B) replenishment lead time or bottleneck cycle time C) convenience or replenishment lead time D) convenience or EOQ calculations E) convenience or bottleneck cycle time

convenience or EOQ calculations

How can the EPQ model be economically reconciled with just-in-time (JIT) production?

decrease ordering cost (S)

____________ capacity can serve to intimidate and preempt competitors from entering the market.

extra

A product's usage during lead time is normally distributed with a mean of 2,000 units and a standard deviation of 125. The product's lead time is 4 weeks. Currently, the reorder point for this product is 8,000. If the company would like to have a service level of 95% for this product then A) it must decrease its safety stock by approximately 18 units. B) it must decrease its safety stock by approximately 205 units. C) it must increase its safety stock by approximately 18 units. D) it must increase its safety stock by approximately 205 units.

it must increase its safety stock by approximately 205 units.

ABC inventory assumes that a company's inventory is ____ equal and _______________ the same level of _________. A) fully, does demand approximately, costs B) counted, requires control for, profit C) not, does not need, control D) not, does not need, ordering E) not, does not need, sales

not, does not need, control

A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is:

one-third as large

_____________ is the probability that demand during lead time will not exceed on-hand inventory

order-cycle service level

What are the two major decisions to be made when using the periodic review system? A) the time between orders and the target inventory level B) the time between orders and the on-hand inventory C) the target inventory level and the on-hand inventory D) the time between orders and the order quantity E) the target inventory level and the order quantity

the time between orders and the target inventory level

The ratio of actual output rate to capacity is _________.

utilization