SCM 564 Final

When quantity discounts are available, order an amount from the highest discount category. True False

False

You are tasked to review the inventory policy of a specific item. You find that the current policy orders 10 units whenever the inventory level is zero (instantaneous replenishment with no demand or lead time variability). You discover that the annual total relevant cost is composed of $12,640 in ordering costs and $6,349 in holding costs. Based on your knowledge of the economic order quantity (EOQ) model, WHAT ACTION(s) would you recommend taking to reduce the annual total relevant cost? EXPLAIN your recommended action(s): What is your rationale, for example, what will the action(s) achieve?

They should decrease the numbers of orders that they are placing each year because the ordering costs are a lot higher than the holding costs. This would decrease the ordering costs and increase the holding costs.

When demand is independent, it is not related to demand for other components or items produced by the firm. True False

True

For inventory systems with constant demand and a fixed lead time, __________. a. the reorder point = lead time demand b. the reorder point > lead time demand c. the reorder point < lead time demand d. the reorder point is unrelated to lead time demand

a. the reorder point = lead time demand

Which errors have the larger effect, underestimated or over estimated errors for the input parameters (demand, ordering, or holding)? a. underestimated error factors b. overestimated error factors c. cannot determine from the information provided

a. underestimated error factors

When there areHurricane Katrina badly damages the Port of New Orleans. The Russia/Ukraine political crisis causes a long-term worker shortage. Correct! A supermarket runs out of beer and soda following Super Bowl Sunday. A global shortage of gold and copper dramatically slows computer chip production. no errors in the input parameters for demand, ordering costs, and handling costs, the error factor is __________. a. 0 b. 1 c. cannot determine from information provided

b. 1

For a particular item, your EOQ = 57, where demand and lead times are known without variation. The total annual holding costs are $257.75. What is the relevant annual total cost for this ordering policy? a. $257.75 b. $275.75(D/Q) c. $515.50 d. $515.50(Q/2)

c. $515.50

For the EOQ model, which of the following relationships is incorrect? a. As the order quantity increases, the number of orders placed annually decreases b. as the order quantity increases, annual holding cost increases c. as the order quantity increases, annual ordering cost increases d. as order quantity increases, average inventory increases

c. as the order quantity increases, annual ordering cost increases