BUS 375 Assignment 5

For a certain​ item, the​ cost-minimizing order quantity obtained with the basic EOQ model is 200​ units, and the total annual inventory​ (carrying and​ setup) cost is​ $400. What is the inventory carrying cost per unit per year for this​ item?

$2.00

A product has a demand of 4000 units per year. Ordering cost is​ $20, and holding cost is​ $4 per unit per year. The EOQ model is appropriate. The​ cost-minimizing solution for this product will cost​ ________ per year in total annual inventory​ (holding and​ setup) costs.

$800

In a safety stock problem where both demand and lead time are​ variable, demand averages 150 units per day with a daily standard deviation of​ 16, and lead time averages 5 days with a standard deviation of 1 day. What is the standard deviation of demand during lead​ time?

154 Units

The assumptions of the production order quantity model are met in a situation where annual demand is 3650​ units, setup cost is​ $50, holding cost is​ $12 per unit per​ year, the daily demand rate is 20 and the daily production rate is 100. What is the production order quantity for this​ problem?

195

A production order quantity problem has a daily demand rate​ = 10 and a daily production rate​ = 50. The production order quantity for this problem is approximately 750 units. What is the average inventory for this​ problem?

300

In a safety stock problem where both demand and lead time are​ variable, demand averages 200 units per day with a daily variance of​ 64, and lead time averages 6 days with a standard deviation of 1 day. How much safety stock is required for a​ 95% service​ level?

331 Units

Which of the following statements regarding​ work-in-process (WIP) inventory is​ FALSE?

Actual​ "run" time is usually a significant portion of the material flow time.

Which of the following is an element of inventory holding​ costs?

All of the above are elements of inventory holding costs A) housing costs B) material handling costs C) investment costs D) pilferage, scrap, and obsolescence

Which of the following statements regarding the reorder point is​ TRUE?

All of the above are true. A. The reorder point is that quantity that triggers an action to restock an item. B. The reorder point is larger than d × L if safety stock is present. C. There is a reorder point even if lead time and demand during lead time are constant. D. A shorter lead time implies a smaller reorder point.

At the economic order​ quantity, holding costs are equal to product costs.

False

For an auto​ manufacturer, the demand for automobile components would be considered as independent demand.

False

The​ fixed-period model requires a perpetual inventory system.

False

​Work-in-process inventory is devoted to​ maintenance, repair, and operating materials.

False

The fixed−period inventory system requires more safety stock than a​ fixed-quantity system​ because:

a stockout can occur during the review period as well as during the lead time.

The purpose of safety stock is​ to:

control the likelihood of a stockout due to variable demand​ and/or lead time.

In the basic EOQ​ model, if the cost of placing an order​ doubles, and all other values remain​ constant, the EOQ​ will:

increase by about​ 41%.

If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown​ below, the average amount of inventory on​ hand: Q*​ = √2DS / H

is​ one-half of the economic order quantity.

When quantity discounts are​ allowed, the​ cost-minimizing order​ quantity:

minimizes the sum of​ holding, ordering, and product costs.

What is the difference between P and Q inventory​ systems?

order size and order spacing

Which of the following should be higher in P systems than Q​ systems?

safety stock

A disadvantage of the​ fixed-period inventory system is​ that:

since there is no count of inventory during the review period, a stockout is possible.

The two most basic inventory questions answered by the typical inventory model​ are:

timing of orders and order quantity.

Which category of inventory holding costs has a much higher percentage than average for​ rapid-change industries such as tablets and smart​ phones?

​pilferage, scrap, and obsolescence

If the standard deviation of demand is six per​ week, demand is 50 per​ week, and the desired service level is​ 95%, approximately what is the statistical safety​ stock?

Cannot be determined without lead time data

Which of the following items is mostly likely managed using a​ single-period order​ model?

Christmas trees

The EOQ model is best suited for items whose demand is dependent on other products.

False

Which of the following is NOT an assumption of the economic order quantity model shown​ below? Q*​ = √2DS / H

Production and use can occur simultaneously.

Among the advantages of cycle counting is that​ it:

allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory.

ABC analysis divides​ on-hand inventory into three​ classes, generally based upon which of the​ following?

annual dollar volume

A specific product has demand during lead time of 100​ units, with a standard deviation during lead time of 25 units. What safety stock​ (approximately) provides an​ 85% service​ level?

26

A certain type of computer costs​ $10 per​ unit, and the annual holding cost is​ 25% of the value of the item. Annual demand is​ 1,000 units, and the order cost is​ $150 per order. What is the approximate economic order​ quantity?

346

In ABC​ analysis, "A" items are the least tightly controlled.

False

In the simple EOQ​ model, if the carrying cost were to​ double, the EOQ would also double.

False

Safety stock in inventory systems depends only on the average demand during the lead time.

False

If setup costs are reduced by substantial reductions in setup​ time, the production order quantity is also reduced.

True

In the quantity discount​ model, it is possible to have a​ cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

True

In the quantity discount​ model, the cost of acquiring goods​ (product cost) is a factor in determining lot size.

True

Variations in setup​ costs, holding​ costs, and demand usually make relatively modest differences in total cost because the EOQ model is robust.

True

Your company has compiled the following data on the small set of products that comprise the specialty repair parts division. Perform ABC analysis on the data. Over which product do you suggest the firm keep the tightest​ control?

U44 Dollar Value: 82,500 Dollar %: 55.53

What is the primary purpose of the basic economic order quantity model shown​ below? Q*​ = √2DS / H

to minimize the sum of setup cost and holding cost

Most inventory models attempt to​ minimize:

total​ inventory-based costs.

One advantage of cycle counting is that it maintains accurate inventory records.

True

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

True

Service level is the complement of the probability of a stockout.

True

The reorder point is the inventory level at which action is taken to replenish the stocked item.

True

Which of the following statements about the basic EOQ model is​ FALSE?

If annual demand were to​ double, the number of orders per year would increase by​ 73%.

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

True

Which of the following is a function of​ inventory?

All of the Above A. to hedge against inflation B. to decouple various parts of the production process C. to take advantage of quantity discounts D. to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand