Ch 15, 16 Concepts

A service level of 99% implies that the probability of stock-out is 1%.

True

Inventories are listed as current assets on a company's balance sheet.

True

Periodic review systems are best suited for the C category of items under the ABC classification scheme.

True

Single-period inventory systems are best suited for florists ordering roses during Valentine's Day.

True

Buffer inventory positioned between two process stages performs a ______ function that enables the two processes to operate ______ of each other.

decoupling; independent

A furniture manufacturer needs an inventory control system to manage ______ items such as table legs and tops when assembling tables for customers.

dependent demand

If the order quantity is ______ the economic order quantity, then the annual holding costs will be ______ the annual ordering costs.

equal to; equal to

In general, the ______ a firm's inventory turnover ratio, the more ______ the firm's use of inventory.

higher; efficient

Interest costs on the money invested in the inventory is considered a ______ cost.

holding

The reorder point when both the demand and lead time are constant is always ______ that when demand is variable and lead time is constant.

lower than

Which of the following total annual costs is irrelevant to making inventory management decisions under the economic order quantity model?

materials purchase

For fixed-order interval systems, the predetermined target inventory level should be high enough to meet all demand during the ______ and the ______.

review period; lead time

One of the underlying causes for the bullwhip effect include the rationing of sale of a product to larger customers which results in smaller customers placing larger than needed orders, this is called ______?

shortage gaming

The optimal ordering amount for companies that order seasonal items should achieve a balance between ______ and ______ costs.

stock-out; excess inventory

If quantity discounts are offered, the best order size is still the economic order quantity amount.

False

The economic order quantity is the quantity that maximizes the total annual holding and ordering costs.

False

The inventory held in excess of firm's cycle stock to meet the expected increase in demand is referred to as safety stock.

False

Company A has a longer order fulfillment lead time than Company B. This means that ______.

Company A gets its product to customers more slowly than Company B.

______ demand items are typically ______ whose demand is determined primarily by ______ conditions.

Independent; finished goods; external

Which of the following is an assumption of the EOQ model?

Lead time is constant and given.

______ costs are administrative costs related to determining an order quantity, preparing purchase invoices, inspecting goods received for quality and quantity, and moving goods for temporary storage.

Ordering

______ is/are regarded as ______ inventory for hotels.

Rooms; tangible

______ is held to respond to the uncertainties in demand and supply levels.

Safety stock

______ inventory includes materials or semi-finished goods that have had some work done on them but are not completed.

Work-in-process

Grocery stores are likely to hold ______ inventory of candies to meet the extra demand during Halloween.

anticipation