BMGT385 Chapter 11

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Dependent demand inventory levels are usually managed by calculations using calculus-driven, cost-minimizing models.

FALSE

Fixed-order quantity inventory models are "time triggered."

FALSE

Fixed-order quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

FALSE

Fixed-time period inventory models are "event triggered."

FALSE

If demand for an item is normally distributed we plan for demand to be twice the average demand and carry 2 standard deviations worth of safety stock inventory.

FALSE

In a price break model of lot sizing the lowest cost quantity is always feasible.

FALSE

In inventory models, high holding costs tend to favor high inventory levels.

FALSE

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine the level of quality to specify.

FALSE

One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation.

FALSE

Price-break models deal with the fact that the selling price of an item generally increases as the order size increases.

FALSE

Safety stock is not necessary in any fixed-time period system.

FALSE

Shortage costs are precise and easy to measure.

FALSE

The "sawtooth effect," named after turn-around artist Al "chainsaw" Dunlap, is the severe reduction of inventory and service levels that occurs when a firm has gone through a hostile takeover.

FALSE

The average cost of inventory in the United States is 20 to 25 percent of its value.

FALSE

The costs associated with reduced inventory results in lower profits.

FALSE

The fixed-order quantity inventory model favors less expensive items because average inventory is lower.

FALSE

The fixed-time period inventory system has a smaller average inventory than the fixed-order quantity system because it must also protect against stockouts during the review period when inventory is checked.

FALSE

The optimal stocking decision in inventory management, when using marginal analysis, occurs at the point where the benefits derived from carrying the next unit are more than the costs for that unit.

FALSE

The standard fixed-time period model assumes that inventory is never counted but determined by EOQ measures.

FALSE

An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.

TRUE

Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.

TRUE

Fixed-order quantity inventory models are "event triggered."

TRUE

Fixed-order quantity inventory systems determine the reorder point, R and the order quantity, Q values.

TRUE

Fixed-time period inventory models are "time triggered."

TRUE

Fixed-time period inventory models generate order quantities that vary from time period to time period, depending on the usage rate.

TRUE

If the cost to change from producing one product to producing another were zero the lot size would be very small.

TRUE

In a price break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

TRUE

In a price break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price.

TRUE

In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment.

TRUE

In the fixed-time period model it is necessary to determine the inventory currently on hand to calculate the size of the order to place with a vendor.

TRUE

Inventory is defined as the stock of any item or resource used in an organization.

TRUE

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine how large the orders to vendors should be.

TRUE

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to specify when items should be ordered.

TRUE

One of the daily, delicate balancing acts that Logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

TRUE

One of the daily, delicate balancing acts that Logistics managers have to perform involves the trade-off between inventory costs and the cost of stock-outs.

TRUE

One of the daily, delicate balancing acts that Logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed.

TRUE

One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing.

TRUE

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

TRUE

Price-break models deal with discrete or step changes in price as order size changes rather than a per-unit change.

TRUE

Price-break models deal with the fact that the selling price of an item varies with the order size.

TRUE

Safety stock can be computed when using the fixed-order quantity inventory model by multiplying a "z" value representing the number of standard deviations to achieve a service level or probability by the standard deviation of periodic demand.

TRUE

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

TRUE

Savings from reduced inventory results in increased profit.

TRUE

Some inventory situations involve placing orders to cover only one demand period or to cover short-lived items at frequent intervals.

TRUE

The "sawtooth effect," is named after the jagged shape of the graph of inventory levels over time.

TRUE

The computation of a firm's inventory position is found by taking the inventory on hand and adding it to the on-order inventory, and then subtracting back-ordered inventory.

TRUE

The fixed-order quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and therefore quicker response to a potential stockout.

TRUE

The fixed-order quantity inventory model requires more time to maintain because every addition or withdrawal is logged.

TRUE

The key difference between a fixed-order quantity inventory model, where demand is known and one where demand is uncertain is in computing the reorder point.

TRUE

Using the probability approach we assume that the demand over a period of time is normally distributed.

TRUE

When stocked items are sold, the optimal inventory decision using marginal analysis is to stock that quantity where the probable profit from the sale or use of the last unit is equal to or greater than the probable losses if the last unit remains unsold.

TRUE

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

TRUE


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