marketing 300 chapter 12

Using ABC analysis, continuous monitoring and accurate record keeping relates best to ____ items. a. A b. B c.. C d. B and C

a. A

Which is not an advantage of the periodic review system? a. Helps to control "A" items b. Inventory need not be monitored continually c. Useful when a large number of items is ordered from the same supplier d. Consolidated shipments lower freight costs

a. Helps to control "A" items

Costs associated with inspecting, unpacking and putting into storage incoming inventory are components of ____ cost. a. Ordering or setup b. Holding c. Shortage d. Unit

a. Ordering or setup

Demand that is stable over time is called ____. a. Static b. Dynamic c. Stochastic d. Deterministic

a. Static

Which of the following is incorrect regarding inventory management? a. The two fundamental inventory decisions are when to order and what to order b. Inventory management applies to goods and to services c. Different types of inventory characteristics require different approaches for control d. SKUs are often aggregated or partitioned into groups with similar characteristics or dollar value

a. The two fundamental inventory decisions are when to order and what to order

For the single-period inventory model, solving for the optimal order quantity involves using a. marginal economic analysis b. total cost analysis c. ABC analysis d. reorder point analysis

a. marginal economic analysis

Using a fixed quantity system (FQS), as the reorder point increases a. safety stock increases b. safety stock decreases c. the number of orders increases d. the number of orders decreases

a. safety stock increases

Two fundamental inventory decisions are when to order and how much to order. Which of the following statement is true with respect to Fixed Quantity (FQS) and Fixed Period (FPS) inven-tory systems? a. A FPS orders a fixed period quantity when the inventory position reaches or drops below the reorder point (r). b. A FPS must cover a time period of T + L to cover the risk of a stock out. c. A FPS places an order for the economic order quantity every T time units. d. A FQS places an order to replenish the inventory position up to a target level (M) when the inventory position reaches the reorder point (r).

b. A FPS must cover a time period of T + L to cover the risk of a stock out.

Demand that varies over time is called ____. a. Static b. Dynamic c. Stochastic d. Deterministic

b. Dynamic

Which of the following is not a key input to a single period inventory model? a. Probability distribution of demand b. Probability that demand is less than the optimal order quantity c. Cost per item of overestimating demand d. Cost per item of underestimating demand

b. Probability that demand is less than the optimal order quantity

Costs associated with backordering a product are called ____ costs. a. Holding b. Shortage c. Ordering d. Setup

b. Shortage

Which one of the following statements is true? a. The EOQ is most accurate when both inventory and order costs are estimated on a full cost basis. b. The EOQ is most accurate when both inventory and order costs are estimated on a pure variable cost basis. c. The EOQ is most accurate when inventory costs are estimated on a full cost basis while order costs are estimated on a pure variable cost basis. d. The EOQ is most accurate when inventory costs are estimated on a pure variable cost basis while order costs are estimated on a full cost basis.

b. The EOQ is most accurate when both inventory and order costs are estimated on a pure variable cost basis.

Inventory that acts as a buffer between workstations in flow shops or departments in job shops is called ____ inventory. a. Raw materials b. Work-in-process c. Cycle stock d. Safety stock

b. Work-in-process

"The inability to satisfy the demand for an item" is the definition of a a. reorder point b. stockout c. lost sale d. backorder

b. stockout

Inventory that represents partially completed products waiting further processing is called ____ inventory. a. Raw materials b.. Work-in-process c. Cycle d. Safety stock

b.. Work-in-process

In ABC inventory analysis, which of the following is true for "C" items? a. Tighter control of "C" items (than for "A" or "B" items) is appropriate. b. "C" items are critical items that must be monitored with a fixed period system. c. "C" items make up a lower percentage of total inventory value ($) than either "A" or "B" items. d. "C" items make up 10-20 percent of inventory items.

c. "C" items make up a lower percentage of total inventory value ($) than either "A" or "B" items.

Which of the following is not a key assumption underlining the classic economic order quantity (EOQ) model? a. The entire order quantity arrives in the inventory at one time b. There are only two types of relevant costs: order/setup and inventory-holding c. Demand is assumed to be stochastic d. Stockouts are not allowed

c. Demand is assumed to be stochastic

Which one of the following statements is true? a. Inventory is any physical asset held for future use or sale. b.. When using ABC analysis, "C" items should be reviewed most frequently. c. Dependent demand is directly related to the demand of other stock keeping units and can be calculated without needing to be forecast. d. Stockouts occur in a Fixed Quantity System (FQS) whenever the lead-time demand exceeds the replenishment level (M).

c. Dependent demand is directly related to the demand of other stock keeping units and can be calculated without needing to be forecast.

Backorders ____. a. Result from lost sales b. Have little financial impact c. May occur as a result of a stockout d. Force a customer to purchase elsewhere

c. May occur as a result of a stockout

Average inventory in the EOQ model is defined as a. The order quantity divided by the number of inventory cycles per year b. Annual usage divided by the number of inventory cycles per year c. One-half the order quantity d. One-half the annual usage

c. One-half the order quantity

Demand that incorporates uncertainty is called ____. a.. Static b. Dynamic c. Stochastic d. Deterministic

c. Stochastic

Which one of the following statements concerning the economic order quantity (EOQ) model is not true when the unit holding cost increases? a. the economic order quantity will decrease b. the number of orders per year will decrease c. total ordering cost will increase d. average inventory will decrease

c. total ordering cost will increase

Which one of the following is not true regarding the Fixed Period System (FPS)? a. The time between orders is constant, but the order quantity might vary. b. An order is time-triggered, not inventory-triggered. c.. The optimal replenishment level includes the demand during the review period plus any desired safety stock. d. When demand is not certain, the FPS requires more safety stock than the equivalent FQS.

c.. The optimal replenishment level includes the demand during the review period plus any desired safety stock.

Inventory position is computed using all the following except a. On-hand b. Scheduled receipts c. Backorders d. Lead time demand

d. Lead time demand

Which of the following is not a component of holding cost? a. Taxes b. Insurance c. Material handling d. Order processing

d. Order processing

Additional inventory kept over and above the average amount required to meet demand is called ____ inventory. a. Seasonal b. Work-in-process c. Finished goods d. Safety stock

d. Safety stock

Which one of the following statements is true? a. The level of safety stock maintained decreases when the desired cycle-service level increases. b. The level of safety stock maintained decreases when the standard deviation of de-mand during lead time increases. c. In a fixed period inventory system, the value of Q is kept the same from one cycle to another.. d. When demand is uncertain and no safety stock is maintained, stock outs will occur during approximately 50 percent of the cycles.

d. When demand is uncertain and no safety stock is maintained, stock outs will occur during approximately 50 percent of the cycles.

Independent demand a. can be derived/calculated b. is related to other SKUs c. is also called finished goods inventory d. needs to be forecasted

d. needs to be forecasted