OP Ch 13

d. Expected sales

As the order quantity decreases, which performance metric that affects expected profit also decreases? a. Expected demand b. Cost per unit c. Stockout probability d. Expected sales

inventory

Expected ______________ must be salvaged.

c. Make-to-order

Mass customization is an example of which type of system? a. First ordering opportunity b. Second ordering opportunity c. Make-to-order d. Make-to-stock

profit

Maximum profit = Expected demand x ____________ per unit sold.

demand

One input to the newsvendor model is a ______________ forecast.

a. Standard deviation of demand

The correlation between demand for two individual products impacts which distribution parameter for the pooled product? a. Standard deviation of demand b. Expected pooled demand

b. overage cost

The cost of ordering too many is called the ______. a. underage cost b. overage cost c. ordering cost d. purchase cost

1

The density and distribution functions always return values between zero and _____________.

a. decreases

The expected gain associated with holding the Qth unit in inventory ______ as Q increases. a. decreases b. increases c. fluctuates d. stays the same

b. larger the order quantity

The higher the desired in-stock probability, the ______ that yields that service level. a. smaller the order quantity b. larger the order quantity c. larger the distribution demand d. smaller the distribution demand

a. higher

The higher the in-stock probability, the _______ the likelihood that all demand is satisfied from inventory. a. higher b. lower

a. smaller the expected sales

The larger the expected sales in the first order, the ______ in the second order. a. smaller the expected sales b. larger the profit c. smaller the overage d. larger the customization

zero

The mean of the standard normal distribution is _________________.

c. more likely a make-to-order system is best

The more leftover inventory costs, the ______. a. less likely a customer will request made-to-order products b. quicker the production system will work c. more likely a make-to-order system is best d. more likely a firm will operate a make-to-stock system

unit

The overage cost is a per _________ cost.

1

The standard deviation of the standard normal distribution is _____________.

c. standard deviation

To compute expected inventory from a z value, you multiple l(z) by the ______ of the demand distribution. a. density function b. average c. standard deviation d. mean

a. The price at which units are sold at the end of the selling season

What is salvage value? a. The price at which units are sold at the end of the selling season b. The price consumers are willing to pay for damaged units c. The price at which units are sold during the selling season d. The per unit price paid to the supplier

c, d

Which strategies does a hybrid quick response system use? Multiple select question. a. Mass customization b. Assemble-to-order c. Make-to-stock d. Make-to-order

customization

With mass ______________, each customer can receive a unique product.

reactive, quick

___________ capacity and ___________ response enable firms to reduce both types of mismatch costs.

correlation

_____________ measures the interaction between two uncertain events.

make to order

produce item after product demand happens

quick response

reduce replenishment lead time so that multiple orders may be placed in a selling season

b. reduces

Adding a second ordering opportunity ______ mismatch costs. a. grows b. reduces c. doubles d. eliminates

b. increase

An increase in demand uncertainty will ______ mismatch costs. a. decrease b. increase c. offset d. eliminate

d. decrease expected profits

An increase in demand uncertainty will ______. a. destabilize the standard deviation b. offset the standard deviation c. increase expected profits d. decrease expected profits

c. increase

An increase in expected demand will ______ maximum profit. a. destabilize b. decrease c. increase d. stabilize

c. stockout

As the order quantity increases, the ______ probability decreases. a. overstock b. stock-loss c. stockout d. in-stock

b. the regular

Expected sales measures those sold at ______ price. a. any b. the regular c. normal and sale d. a discounted

d. larger

For a distribution function F(Q), the larger the value of Q, the ______ the probability it returns. a. less demand b. smaller c. less reliable d. larger

b. decrease

For a given coefficient of variation of demand, an increase in the critical ratio will ______ mismatch costs. a. increase b. decrease c. destabilize d. quadruple

c. higher the corresponding z value

For a given normal distribution, the higher the order quantity the ______. a. lower the salvage ratio b. lower the corresponding z value c. higher the corresponding z value d. lower the standard deviation

c. less than

If a quantity is ordered such that the in-stock probability is ______ the critical ratio, then ordering more will increase the expected profit. a. equal to b. greater than c. less than d. parallel to

c. greater than

If an organization orders more than the quantity that maximizes expected profit, the in-stock probability will be ______ the critical ratio. a. equal to b. less than c. greater than d. a fraction of

b. equal to

If the critical ratio is 50%, then the underage must be ______ the overage. a. double b. equal to c. less than d. greater than

a. conservative

Knowing a second order can be placed helps an organization be more ______ with its first order. a. conservative b. aggressive c. slow d. optimistic

standardized

Modular components have _______________ interfaces to other components.

d. decrease

One strategy for managing the newsvendor environment is to ______ demand uncertainty. a. increase b. cultivate c. eliminate d. decrease

supply

One type of mismatch cost is the cost of having too much ________________.

pooling

Product ___________ reduces the variety offered to customers by combining similar products.

c. underage costs and overage costs

Reducing the purchase cost will impact which metrics? a. underage costs b. overage costs c. underage costs and overage costs d. processing costs and holding costs

b. increases

The expected loss associated with holding the Qth unit in inventory ______ as Q increases. a. stays the same b. increases c. decreases d. fluctuates

in-stock

The probability that enough inventory is available to satisfy all demand is called the ______________ probability.

unit

The underage cost is a per ______________ cost.

false

True or false: All demand uncertainty can be eliminated with the use of better forecasting methods.

false

True or false: Calculating the critical ratio is the final step in determining the optimal order quantity.

postponement (product pooling)

in a multiproduct setting, postpone product differentiation until closer to point of sale (statistical economies of scale)

maximum profit

the highest possible expected profit; occurs when inventory is available for all customers

stockout

The probability that some demand was not able to purchase a unit is called the ______________ probability.

d. after demand for that unit is known

When a business operates on a make-to-order basis, a product is made ______. a. when the supplier offers a discount b. whenever a customer supplies a new, unique design c. after existing inventory has been exhausted d. after demand for that unit is known

a. underage

When determining the best first order quantity, which input changes because of the opportunity to place a second order later? a. underage b. overage c. demand distribution d. discounts

little

When placing a single order in the face of uncertain demand, organizations have to balance having "too much" against having "too ____________."

c. negative

When the order quantity is below the mean of the demand distribution, the z value is ______. a. erratic b. normal c. negative d. positive

standard deviation

When z = -1, the optimal order quantity should be one ___________ __________ below the mean of the actual demand distribution.

a. Selling price is $500. Purchase price from supplier is $100.

Which item has the highest underage cost? a. Selling price is $500. Purchase price from supplier is $100. b. Selling price is $700. Purchase price from supplier is $500. c. Selling price is $500. Purchase price from supplier is $300. d. Selling price is $300. Purchase price from supplier is $100.

d. NORM.S.DIST

Which of these Excel functions are needed to calculate l(z)? a. Norm.Q.Dist b. NORM.ST.DEV c. Normsinv d. NORM.S.DIST

b. make-to-stock

A gallon of milk that you buy from a grocery store is produced in a ______ system. a. mass customization b. make-to-stock c. specialty product d. make-to-order

a. stockout probability

A high ______ indicates that some customer will probably not be able to purchase a unit. a. stockout probability b. in-stock probability c. expected inventory d. salvage ratio

b. Expected sales

As the order quantity decreases, which performance metric that affects expected profit also decreases? a. Expected demand b. Expected sales c. Stockout probability d. Cost per unit

d. increases

As the order quantity, Q, increases, the in-stock probability ______. a. remains steady b. decreases c. begins to fluctuate d. increases

d. lower

Assume the purchase price is higher in the second order than in the first. When determining the best first order quantity, the critical ratio is ______ when there is an opportunity to make a second order than when there isn't. a. steeper b. higher c. deeper d. lower

sold, inventory

At the end of the season, every unit that is ordered is either by ______________ the seller or left in ______________.

c. Opportunity cost of stockouts and cost of leftover inventory

Being able to place a second order impacts which mismatch costs? a. Cost of leftover inventory and purchase costs b. Opportunity cost of stockouts c. Opportunity cost of stockouts and cost of leftover inventory d. Cost of leftover inventory

d. negatively correlated

Demand for high definition televisions and cables for connecting those televisions to other components is likely ______. a. positively correlated b. independent (not correlated) c. random d. negatively correlated

b. -1

Demand uncertainty is effectively eliminated when pooling two products that have correlation that is: Multiple choice question. a. 1 b. -1 c. 0

profit

Expected ______________ = (Price x Expected Sales) + (Salvage value x Expected inventory) - (Cost per unit x Q)

mismatch

Expected profit = Maximum profit - __________ costs.

second

Expected sales from first order + Expected sales from ___________________ order = Expected demand (assuming that you have perfect information regarding demand when placing the second order).

b. mean

For the normal distribution bell shape, the peak of the density function is at the ______ of the distribution. a. standard deviation b. mean c. variance d. mode

c. Make-to-order

For which type of system does success depend on customers being willing to wait? a. Mass production b. Second ordering opportunity c. Make-to-order d. Make-to-stock

b. rigorous and data-driven

Forecasting methods should be ______. a. shuffled around a few times each year b. rigorous and data-driven c. constantly revised d. based on hunches or intuition

a. greater than

If the expected benefit of having a 300th unit in inventory is ______ the expected cost of having a 300th unit, then the Newsvendor model prescribes an order quantity that is at least 300 units. a. greater than b. more than half of c. less than d. equal to

critical

If the probability demand is less than or equal to Q*, the quantity that maximizes expected profit is equal to the ______________ ratio.

b. increases

If the standard deviation of the demand distribution increases—and everything else remains the same—then the expected inventory ______. a. decreases b. increases

modular

In an assemble-to-order system, once an order is received all that remains is to assemble the product from ___________________ components.

b. before demand is known

In the newsvendor model, the order quantity is determined ______. a. at the end of each business day b. before demand is known c. once a week d. after demand is known

a. only one

In the newsvendor model, the organization can make ______ order(s) for inventory. Multiple choice question. a. only one b. multiple

c. increase

Increasing the profit margin relative to the cost of leftover inventory will ______ the critical ratio. a. skew b. decrease c. increase d. minimize

a. conservative

Knowing a second order can be placed helps an organization be more ______ with its first order. a. conservative b. optimistic c. slow d. aggressive

b. variety or different versions of a product

Make-to-order is effective when customers want ______. a. recently discontinued products that are on sale b. variety or different versions of a product c. products to be available quickly d. common products at the lowest possible price

c. reasonably quick

Make-to-order is effective when production is ______. a. operating at a low utilization rate b. based on the firm's leftover inventory c. reasonably quick d. organized into a long queue

d. completion of products only occurs after customers announce their demand

Make-to-order means ______. a. the product is not made by the business that sells the product b. customers design the product themselves c. the product must be ordered from a limited number of suppliers d. completion of products only occurs after customers announce their demand

d. After the selling season

Salvage value is applied to units during which period? a. When a business is experiencing bankruptcy b. During the selling season c. After damaged items have been removed from inventory d. After the selling season

a, b

Select all the products that are suitable for the make-to-stock system. a. Groceries b. Newspapers c. Tailored suits d. Espresso drinks

c. reducing

Statistical economies of scale refers to ______ uncertainty in demand by having a larger scale of pooled demand. a. skewing b. eliminating c. reducing d. increasing

in-stock

Stockout probability = 1 -_________ _ probability.

a. A hybrid of make-to-order and make-to-stock

Suppose a manufacturer assembles a product from component parts only after a customer has placed an order. However, the firm makes the component parts in advance, based on forecasts. This manufacturer is operating what type of system? a. A hybrid of make-to-order and make-to-stock b. Mass customization c. Make-to-order d. Make-to-stock

a. 350

Suppose you are using a statistical table to determine Q, and the critical ratio is .612. If F(300) = .598 and F(350) = .615, then the round-up rule states that you should choose Q = ______. a. 350 b. 300 c. 375 d. 400

b. relative

The coefficient of variation is a(n) ______ measure of demand uncertainty. a. unreliable b. relative c. absolute d. inaccurate

inventory

The expected number of units not sold at the end of the season is called expected _____________.

sales

The expected number of units sold during the season at regular price is called expected ________________.

d. larger

The larger the correlation between two products, the ______ the coefficient of variation of the pooled product. a. less accurate b. smaller c. more downward sloping d. larger

a. smaller

The larger the correlation between two products, the ______ the expected profits. a. smaller b. larger c. less predictable d. more likely

a. smaller

The larger the correlation between two products, the ______ the expected profits. a. smaller b. larger c. more likely d. less predictable

d. larger the order quantity

The larger the critical ratio, the ______ that maximizes expected profit. a. smaller the underage b. smaller the order quantity c. larger the underage d. larger the order quantity

a. larger the optimal order quantity

The larger the optimal order quantity for the standard normal distribution, the ______ for the true demand distribution. a. larger the optimal order quantity b. less predictable the critical ratio c. smaller the optimal order quantity d. more predictable the critical ratio

b. high coefficient of variation of demand and low critical ratio

The least profitable situation has ______. a. low coefficient of variation of demand and high critical ratio b. high coefficient of variation of demand and low critical ratio c. high coefficient of variation of demand and high critical ratio d. low coefficient of variation of demand and low critical ratio

cost

The newsvendor chooses an order quantity by comparing the expected ______________ of the Qth unit with the expected benefit.

d. Expected profit

The order quantity prescribed by the newsvendor model optimizes which performance metric? a. Expected sales b. In-stock probability c. Stockout probability d. Expected profit e. Expected inventory

b. larger

The round-up rule states that when you are looking up a probability in a statistical table and the probability falls between two entries, you should choose the entry with the ______ probability. a. least risky b. larger c. most likely d. smaller

b. absolute

The standard deviation is a(n) ______ measure of demand uncertainty. a. unreliable b. absolute c. relative d. approximate

b, c

To compute expected sales for a given order quantity you need to know or compute which of the following: Multiple select question. a. the actual demand b. the order quantity c. expected inventory

c. standard normal

To find the optimal order quantity using the standard normal distribution, you first find the optimal order quantity for the ______ distribution. a. true/actual demand b. density function c. standard normal d. critical ratio

critical ratio

To use the graph method to find Q*, you first find the point on the y-axis that equals the _______________ ______________.

false

True or false: Demand often follows the standard normal distribution.

false

True or false: Expected profit always increases as in-stock probability increases.

true

True or false: Expected profit is partially based on the consequences of inventory that needs to be salvaged.

false

True or false: In a make-to-stock system, an item is produced when its eventual owner is known.

false

True or false: The newsvendor model is appropriate for a setting where a customer will wait for the next shipment to show up, in cases where a store runs out of inventory.

false

True or false: To calculate expected profit when there is a second ordering opportunity requires the same formula as when there is only one ordering opportunity.

c. a circle

Two outcomes that are independent appear graphically as ______. a. a cluster that is angled up b. a cluster that is angled down c. a circle d. a straight line

a. a cluster that angles down

Two outcomes that are negatively correlated appear graphically as ______. a. a cluster that angles down b. a steeply curved line c. a cluster that angles up d. a circle

a. a cluster that angles up

Two outcomes that are positively correlated appear graphically as ______. a. a cluster that angles up b. a circle c. a wedge shape d. a cluster that angles down

d. =Norm.s.inv(Critical ratio)

Which Excel function is used to find the optimal order quantity for the standard normal distribution? a. =Norm.cr.ra(Critical ratio) b. =Norm.dist(Critical ratio) c. =Norm.opt.ord(Critical ratio) d. =Norm.s.inv(Critical ratio)

a. Negative

Which correlation leads to a reduced coefficient of variation for pooled demand? a. Negative b. Positive c. Zero correlation

b. Total demand across a set of products

Which demand is easiest to forecast? a. Demand for each individual product b. Total demand across a set of products c. Demand for products that have not yet been launched d. Demand for several groups of products during the next five years

a. Mean doubles and standard deviation increases by a factor of 1.75.

Which is an example of statistical economies of scale when pooling two demands? a. Mean doubles and standard deviation increases by a factor of 1.75. b. Mean doubles and standard deviation decreases by half. c. Mean doubles and standard deviation increases by a factor of 2.25. d. Mean doubles and standard deviation doubles.

a, d

Which of the following are inputs to the newsvendor model? Multiple select question. a. Cost of ordering too much b. Lead time c. Customer service level d. Cost of ordering too little

b. Finding the optimal order quantity for the standard normal distribution

Which step is performed differently in the statistical table and computer methods? a. Finding the quantity that sets F(Q) equal to the critical ratio b. Finding the optimal order quantity for the standard normal distribution c. Finding the order quantity Q in which the probability that demand is Q or higher will exceed the critical ratio d. Converting the optimal order quantity for the standard normal distribution to the optimal order quantity for the true demand distribution

b. Make-to-order

Which system does not have leftover inventory costs? a. First ordering opportunity b. Make-to-order c. Make-to-stock d. Second ordering opportunity

reactive

________________ capacity allows firms to react to changes in demand forecast.

quick

________________ response is the capability to respond to updated demand information.

tailored sourcing

use a low lead time, but perhaps an expensive supplier as a backup for a low-cost, but perhaps long lead time supplier

improved forecasting

use better market intelligence and collaboration to reduce demand uncertainty