Ch. 13 T/F
Profit margins tend to be inversely related to inventory turns
true
Solving quality problems can lead to lower inventory levels
true
The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable
true
The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases
true
The basic EOQ model ignores the purchasing cost
true
The calculation of safety stock requires knowledge of demand and lead time variability
true
The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout
true
The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory
true
The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable
true
The rate of demand is an important factor in determining the ROP
true
The single-period model can be very helpful in determining how much to order
true
The total cost curve is relatively flat near the EOQ
true
The two basic issues in inventory are how much to order and when to order
true
The two main concerns of inventory control relate to the costs and the level of customer service.
true
To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and the size of orders
true
Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered
true
Variability in demand and/or lead time can be compensated for by safety stock
true
When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill
true
A quantity discount will lower the reorder point
false
A retail store that carries twice as much inventory as its competitor will provide twice the customer service level
false
A single-period model would be used mainly by organizations going out of business
false
An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier
false
An inventory buffer adds value and lowers cost in all supply chains
false
Because price is not a factor in the EOQ formula, quantity discounts will not affect EOQ calculations
false
Decoupling operations applies to the railroad industry
false
Discrete stocking levels are used when an organization does not want visibility of inventory levels
false
EOQ inventory models are basically concerned with the timing of orders
false
In the A-B-C approach, C items typically represent about 15 percent of the number of items, but 60 percent of the dollar usage
false
In the EOQ formula, holding costs under 10 percent are expressed as percentages, above 10 percent are expressed as annual unit costs
false
In the fixed-order-interval model, the order size is the same for each order
false
In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve
false
In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve
false
It is critical that the exact quantity calculated in the EOQ model be ordered
false
ROP models assume that demand during lead time is composed of a series of dependent daily demands
false
ROP models indicate to managers the time between orders
false
Reorder point models are primarily used for dependent-demand items
false
Safety stock eliminates all stockouts
false
Safety stock is held because we anticipate future demand
false
The A-B-C approach involves classifying inventory items by unit cost, with expensive items classified as A items and low-cost items classified as C items
false
The average inventory level is inversely related to order size
false
The fixed-order-interval model requires a continuous monitoring of inventory levels
false
The objective of inventory management is to minimize the cost of holding inventory
false
The single-period model can be very helpful in determining when to order
false
Understocking an inventory item is a sure sign of inadequate inventory control
false
Annual ordering cost is inversely related to order size
true
Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost
true
Cycle counting can be used in motorcycle inventory control
true
DVD recorders would be an example of independent-demand items
true
In the single-period model, the service level is the probability that demand will not exceed the stocking level in any period
true
Interest, insurance, and opportunity costs are all associated with holding costs
true
Monitoring inventory turns over time can be used as a measure of performance
true
One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.
true
When to order can be calculated by the ROP and expressed as a quantity
true