Prod Op Ch 9 final questions
When looking at inventory management, the term "lot size" refers to the physical dimensions of the area where the inventory is stored.
FALSE
When using ABC analysis, class C SKUs should be reviewed frequently.
FALSE
What is generally TRUE about class A SKUs in ABC analysis? They represent about:
20 percent of all SKUs.
What is generally TRUE about class B SKUs in ABC analysis? They represent about:
30 percent of all SKUs and about 15 percent of the dollar usage.
What is generally TRUE about class C SKUs in ABC analysis? They represent about:
5 percent of the dollar usage.
What is generally TRUE about class C SKUs in ABC analysis? They represent about:
50 percent of all SKUs.
What is generally TRUE about class A SKUs in ABC analysis? They represent about:
80 percent of the dollar usage.
Which one of the following statements is BEST?
A P system requires more safety stock than a Q system.
Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE?
A decrease in holding cost will increase the EOQ.
Which one of the following statements about inventory control systems is BEST?
A single-bin system is essentially a P system, with the target inventory and current inventory position established visually.
Which one of the following statements concerning the economic order quantity (EOQ) is TRUE?
An increase in demand will increase the EOQ.
Which of these statements about pipeline inventory is BEST?
Changing an item's lot size does not directly affect the average level of the pipeline inventory.
A continuous review system is sometimes called a fixed interval reorder system.
FALSE
A stock-keeping unit (SKU) is a specially designed container for holding a specific amount of an inventory item somewhere along the supply chain.
FALSE
An experienced operations manager can tell at a glance whether an item should be classified as safety stock, anticipation inventory, or cycle stock.
FALSE
Considering the EOQ model, smaller lots are justified when holding costs are decreased.
FALSE
Dependent demand items are those items for which demand is influenced by market conditions and is not related to inventory decisions for any other item held in stock.
FALSE
EOQ should be used if you use a make-to-order strategy and the customer specifies that the entire order be delivered in one shipment.
FALSE
If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the Inventory Position (IP) is the sum of the three, or 300 units.
FALSE
One component of the ordering cost of inventory is shrinkage.
FALSE
Reducing setup costs will increase the pressure to keep large inventories.
FALSE
Repeatability is an undesirable feature of some orders because they must be repeated until the order is filled correctly.
FALSE
The EOQ is the smallest lot size that a supplier will allow a customer to order.
FALSE
The primary lever to reduce anticipation inventory is to place orders closer to the time when they must be received.
FALSE
Which one of the following statements regarding the economic order quantity (EOQ) is TRUE?
If an order quantity is larger than the EOQ, the annual holding cost for cycle inventory exceeds the annual ordering cost.
Which one of the following statements represents an advantage of the P system over the Q system?
Orders can be more easily combined to the same supplier.
ABC analysis is closely related to:
Pareto analysis.
Which one of the following is NOT an assumption of the EOQ model?
Quantity discounts can be taken advantage of for large lot sizes.
A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled later.
TRUE
A continuous review system is sometimes called a reorder point system.
TRUE
A mom and pop gas station near a remote lake popular with anglers is more likely to use a periodic review system than a chain of department stores.
TRUE
A periodic review system is a system in which an item's inventory position is reviewed periodically rather than continuously.
TRUE
A quantity discount is attractive because there is a drop in the price per unit when the order is sufficiently large.
TRUE
A stock-keeping unit (SKU) is an individual item or product that has an identifying code and is held in inventory somewhere along the supply chain.
TRUE
A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.
TRUE
ABC analysis is a process for categorizing SKUs according to dollar usage so that managers can focus on items with the highest dollar value.
TRUE
As the annual demand increases, the EOQ also increases.
TRUE
As the service level increases, the probability of not running out of stock during a cycle decreases.
TRUE
Considering the EOQ model, a reduction in ordering costs justifies reducing the lot size ordered.
TRUE
Cycle counting is an inventory-control method whereby storeroom personnel physically count a small percent of the total number of items each day.
TRUE
EOQ should be used if you follow a make-to-stock strategy and the item has relatively stable demand.
TRUE
If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the Inventory Position (IP) is 100 units.
TRUE
Increasing inventory levels can sometimes help a firm reduce both its inbound and outbound transportation costs.
TRUE
Independent-demand items are those items for which demand is influenced by market conditions and is not related to inventory decisions for any other items held in stock.
TRUE
Inventory management is the planning and controlling of inventories in order to meet the competitive priorities of the organization.
TRUE
One component of the holding cost of inventory is interest.
TRUE
Setup cost is independent of order size.
TRUE
The primary reason for keeping inventories low is that inventory represents a temporary monetary investment.
TRUE
The scheduled receipts are orders that have been placed but not yet received.
TRUE
The two-bin inventory system is a type of visual system.
TRUE
When looking at inventory management, the term "lot size" refers to the quantity of an inventory item management either buys from a supplier or manufactures using internal processes.
TRUE
Which one of the following statements represents an advantage of a Q system over the P system?
The Q system is more suited for quantity discounts and physical limitations.
A company operating under an EOQ policy enjoys rising annual demand for their products for three consecutive years. During this time their holding cost and ordering cost remain constant. Which statement is BEST?
Their order quantity will rise but the time between orders will fall.
An inventory system answers two important questions: when to order and how much to order. Which of the following statements correctly explains how a Q system (continuous review system) or a P system (periodic review system) answers these questions?
Under a P system, an order is placed to replenish the inventory position up to the target level T every P time periods.
Which one of the following statements concerning a continuous review system is BEST?
Under a continuous review system, an item's inventory position corresponds to the on-hand inventory unless there are backorders or one or more scheduled receipts.
Sensitivity analysis on the economic order quantity (EOQ) formula can help the operations manager answer several questions on how to manage inventories. Which one of the following questions is NOT answered by EOQ sensitivity analysis?
What should happen to lot sizes if supply and lead-time uncertainty increase?
Which one of the following statements is BEST?
When no safety stock is maintained, stockouts will occur during approximately 50% of the cycles.
The manager at Crystal Mountain Ski Resort lowers the price of lift tickets to $2 during July and August, a traditionally slow period for skiing. This secondary lever impacts:
anticipation inventory.
Which of the following does not increase repeatability?
customization
Items sold to a firm's customers are called:
finished goods.
Which of the following does NOT generate pressure to increase inventories?
inventory shrinkage costs
Which of the following generates pressure to decrease inventories?
inventory shrinkage costs
Which of the following does NOT generate pressure to decrease inventories?
ordering costs
Which of the following generates pressure to increase inventories?
ordering costs
Which of the following is NOT a lever for reducing cycle inventories?
place purchased item orders at fixed intervals
Inventories needed for the production of services and goods (inputs to a firm's transformation processes) are called:
raw materials.
One of the secondary levers for reducing pipeline inventory is to:
select more responsive suppliers.
Which one of the following descriptions best defines the cycle-service level as a measure of customer service?
the desired probability of not running out of stock in any one inventory cycle
The term lot size signifies:
the number of units of a single item that a company buys from a supplier
You have taken a job in industry and are facing your first ordering decision. As you prepare to place the order, you remember your instructor teaching you that you wouldn't use the EOQ formula if:
the order size is constrained by capacity limitations such as the number or size of the delivery trucks.
Items, such as components or assemblies, needed to manufacture a final product are called:
work-in-process.
