Ch 4 inventory management

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Type: True or False The top 2 primary functions of inventory are (1) To meet customer demand, and (2) To buffer against uncertainty in demand and/or supply.

TRUE (correct)

Type: True or False The lowest inventory level at which a new order must be placed to avoid a stockout is known as the Replenishment Threshold

False

Type: True or False There are no inventories in the service industry.

False

Which inventory stock level is generally used for a very specific purpose or future event, and for a defined period of time? -Cycle Stock -Safety Stock -Strategic Stock -Pipeline Stock

Strategic Stock (correct)

The primary purpose of the basic economic order quantity model is? -To calculate the reorder point, so that replenishments take place at the proper time -To minimize the sum of carrying cost and holding cost -To maximize the customer service level -To minimize the sum of ordering cost and holding cost

To minimize the sum of ordering cost and holding cost (correct)

Type: True or False The four broad categories of inventory are raw materials, work-in-process, MRO, and finished goods.

True

Which of the following is NOT an example of an ordering cost for products purchased from a supplier? -The cost of transmitting the order -The cost associated with processing the invoice -The cost of receiving the product -The opportunity cost of not ordering from a least cost supplier -The cost of handling the product

The opportunity cost of not ordering from a least cost supplier (correct)

A type of inventory system that issues an order whenever a withdrawal is made from inventory, is known as? -ABC System -Bin System -Base Stock Level System -Single Period Inventory Model

Base Stock Level System (correct)

Inventory costs which are independent of the output quantity are called? -Indirect Costs -Variable Costs -Fixed Costs -Carrying Costs

Fixed Costs (correct)

Type: True or False The Economic Order Quantity (EOQ) is the optimal order size because it minimizes the annual total inventory cost.

TRUE (correct)


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