MGMT Chapter 12 Test 4
In ABC analysis, which of the following items typically comprise 60 to 80 percent of total dollar usage but only 10 to 30 percent of the items?
A
Which is NOT a feature of the periodic review system?
The order quantity, Q, is always fixed
Two fundamental inventory decisions are: when to order and how much to order. Which of the following statement is TRUE about fixed-quantity (FQS) and fixed-period (FPS) inventory systems?
an FPS must cover a time period of T + L to cover the risk of a stockout
A fixed-period (FPS) inventory system:
chooses a replenishment level (M) which includes the demand during the rewview period and lead time, plus any safety stock
In ABC inventory analysis, which of the following is TRUE of class A items?
class A items account for 5 to 15 percent of the total dollar value
In ABC inventory analysis, which of the following is TRUE of class C items?
class C items makeup a lower percentage of total dollar value than either class A or class B
In a fixed order quantity (FOQ) system, which of the following is TRUE when interest rates increase and all other costs remain the same?
cycle inventory decreases
Which of the following is NOT a key assumption underlining the classic economic order quantity (EOQ) model?
demand is assumed to stochastic
Which of the following statements is TRUE?
dependent demand is directly related to the demand of other stock-keeping units (SKUs) and can be calculated without needing to be forecasted
Demand that varies over time is called _____ demand.
dynamic
"C" items are the critical few that must be closely managed in an inventory system.
false
A stock-keeping unit is the same no matter at which location the item is found.
false
Because of demanding customers, organizations must always maintain a 100 percent service level.
false
Because the fixed-quantity system orders the same amount each time, time between orders will be constant, even with variable demand
false
Costs associated with maintaining storage facilities such as gas and electricity, taxes, and insurance are associated with fixed ordering costs.
false
Dependent demand, unlike independent demand, needs to be forecasted.
false
In a single-period inventory situation, the only inventory decision is when to trigger an order.
false
Inventory management does not involve supplies and replacement parts
false
Inventory position refers to the physical quantity of items on hand in an inventory system
false
Inventory-holding costs are easily measured by accounting departments
false
Lead time is the time it takes to prepare an order for shipping to a customer.
false
Opportunity cost of capital is an example of ordering cost.
false
Setup costs depend on the number of items manufactured
false
Stochastic demand inventory models are easier to analyze and solve than deterministic models.
false
The economic order quantity (EOQ) model follows variable lead time
false
When a customer is unwilling to wait for an item that is not in stock and purchases the item elsewhere, a backorder has occurred.
false
Work-in-process inventory is completed products ready for distribution or sale to customers.
false
Which of the following statements is TRUE? a. The level of safety stock maintained decreases when the desired cycle service level increases. b. The level of safety stock maintained decreases when the standard deviation of demand during lead time increases. c. In a fixed-period inventory system, the value of Q is kept the same from one cycle to another. d. In a fixed-order-quantity system, the reorder point is the average demand during the lead time, plus the additional safety stock when demand is uncertain.
in a fixed-order quantity system, the reorder point is the average demand during the lead time, plus the additional safety stock when demand is uncertain
Inventory position is computed using all the following EXCEPT:
lead-time demand
Backorders:
may occur as a result of a stockout
Independent demand:
needs to be forecasted
Average inventory in the economic order quantity (EOQ) model is defined as:
one-half of the order quantity
Which of the following is NOT a component of holding cost? a. Tax b. Insurance c. Material handling d. Order processing
order processing
Costs associated with configuring tools, equipment, and machines within a factory to produce an item are components of _____ costs.
ordering
Additional inventory that is kept over and above the average amount required to meet demand is called _____ inventory.
safety stock
Costs associated with backordering products are called _____ costs.
shortage
Demand that is stable over time is called _____ demand.
static
Demand that incorporates uncertainty is called_____ demand
stochastic
Which of the following statements is NOT TRUE?
stock-keeping unit (SKU) is a single item or asset stored at multiple locations
A _____ is defined as the inability to satisfy the demand for an item
stockout
Which of the following statements is TRUE? a. Fixed costs associated with any ordering are relevant. b. Sunk costs associated with any ordering are irrelevant. c. Variable costs associated with inventory holding are irrelevant. d. Variable costs associated with ordering are irrelevant.
sunk costs associated with any ordering are irrelevant
Which of the following statements concerning the economic order quantity (EOQ) model is NOT TRUE when the unit holding cost increases?
the economic order quantity will decrease
Which of the following statements is NOT TRUE regarding the fixed-period system (FPS)?
the optimal replenishment level includes the demand during the review period, plus any desired safety stock
In a fixed-quantity system (FQS), as the reorder point increases:
the safety stock increases
Which of the following is NOT TRUE regarding inventory management?
the two fundamental inventory decisions are: where to order and what to order
"A" items typically comprise a high percentage of total dollar usage but a low percentage of unit volume.
true
Airline flights to ski areas near Denver, Colorado, probably have different means and variances throughout the year. This is an example of dynamic demand.
true
An airline seat is an example of an asset held for future use or sale.
true
Call center phone lines are examples of inventory in service organizations.
true
Deterministic demand always remains stable over time and does not fluctuate.
true
Finished-goods inventory consists of completed products that are ready for sale.
true
In a fixed quantity inventory system with certain demand, the reorder point is chosen to be the average demand during the lead time.
true
In general, total ordering costs are equal to total inventory-holding cost for the optimal solution to the economic order quantity (EOQ) model.
true
In the fixed-period system, managers must make two key decisions: the time interval between reviews and the replenishment level
true
Larger orders result in higher total holding cost but lower total ordering cost.
true
Many practical inventory situations include backorders and quantity discounts.
true
Marketing and operations generally prefer high inventory levels, while finance would prefer small inventories.
true
Radio-frequency identification (RFID) tags are used to track stock-keeping units in supply chains.
true
Safety stock inventory is an additional planned on-hand inventory that acts as a buffer to reduce the risk of a stockout
true
The decision of how many fruit baskets to make for the holiday season would be analyzed using a single-period inventory model
true
_____ inventory acts as a buffer between workstations in flow shops or departments in job shops to enable the operating process to continue.
work-in-process
_____ inventory consists of partially completed products in various stages of completion that are awaiting further processing.
work-in-process (WIP)
