Mgmt 318-Chapter 12

A) The company was opened by Jeff Bezos in 1995.

B) The company was founded as, and still is, a "virtual retailer" with no inventory.

C) The company is now a world-class leader in warehouse management and automation.

D) The company uses both United Parcel Service and the U.S. Postal Service as shippers.

E) Amazon obtains its competitive advantage through inventory management.

A) to decouple or separate parts of the production process

B) to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers

C) to take advantage of quantity discounts

D) to hedge against inflation

E) All of the above are functions of inventory.

A) to decouple or separate parts of the production process

B) to provide a stock of goods that will provide a selection for customers

C) to take advantage of quantity discounts

D) to minimize holding costs

E) All of the above are functions of inventory.

A) raw material inventory

B) work-in-process inventory

C) maintenance/repair/operating supply inventory

D) safety stock inventory

E) All of these are main types of inventory.

A) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings.

B) In ABC analysis, "A" Items are tightly controlled, have accurate records, and receive regular review by major decision makers.

C) In ABC analysis, "C" Items have minimal records, periodic review, and simple controls.

D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.

E) All of the above statements are true.

A) inventory may be categorized by measures other than dollar volume

B) it categorizes on-hand inventory into three groups based on annual dollar volume

C) it is an application of the Pareto principle

D) it states that all items require the same degree of control

E) it states that there are the critical few and the trivial many inventory items

A) all items in inventory must be monitored very closely

B) there are usually a few critical items, and many items which are less critical

C) an item is critical if its usage is high

D) more time should be spent on class "C" items because there are more of them

E) an item is critical if its unit price is high

A) item quality

B) unit price

C) the number of units on hand

D) annual demand

E) annual dollar volume

A) is a process by which inventory records are verified once a year

B) provides a measure of inventory accuracy

C) provides a measure of inventory turnover

D) assumes that all inventory records must be verified with the same frequency

E) assumes that the most frequently used items must be counted more frequently

A) Service inventory is a fictional concept, because services are intangible.

B) Service inventory needs no safety stock, because there's no such thing as a service stockout.

C) Effective control of all goods leaving the facility is one applicable technique.

D) Service inventory has carrying costs but not setup costs.

E) All of the above are true.

A) timing and cost of orders

B) quantity and cost of orders

C) timing and quantity of orders

D) order quantity and service level

E) ordering cost and carrying cost

A) makes the annual physical inventory more acceptable to management

B) does not require the detailed records necessary when annual physical inventory is used

C) does not require highly trained people

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

E) does not need to be performed for less expensive items

A) housing costs

B) material handling costs

C) investment costs

D) pilferage, scrap, and obsolescence

E) All of the above are elements of inventory holding cost.

A) Demand is known, constant, and independent.

B) Lead time is known and constant.

C) Quantity discounts are not possible.

D) Production and use can occur simultaneously.

E) The only variable costs are setup cost and holding (or carrying) cost.

A) to calculate the reorder point, so that replenishments take place at the proper time

B) to minimize the sum of carrying cost and holding cost

C) to maximize the customer service level

D) to minimize the sum of setup cost and holding cost

E) to calculate the optimum safety stock

A) is smaller than the holding cost per unit

B) is zero

C) is one-half of the economic order quantity

D) is affected by the amount of product cost

E) All of the above are true.

A) 16

B) 70

C) 110

D) 183

E) 600

A) the likelihood of a stockout

B) the number of items ordered

C) total inventory based costs

D) the number of orders placed

E) the safety stock

A) increase by about 41%

B) increase by 100%

C) increase by 200%

D) increase, but more data is needed to say by how much

E) either increase or decrease

A) 24

B) 100

C) 141

D) 490

E) 600

A) If the ordering cost were to double, the EOQ would rise.

B) If annual demand were to double, the EOQ would increase.

C) If the carrying cost were to increase, the EOQ would fall.

D) If annual demand were to double, the number of orders per year would increase.

E) All of the above statements are true.

A) If the setup cost were to decrease, the EOQ would fall.

B) If annual demand were to increase, the EOQ would increase.

C) If the ordering cost were to increase, the EOQ would rise.

D) If annual demand were to double, the EOQ would also double.

E) All of the above statements are true.

A) three times as large

B) one-third as large

C) nine times as large

D) one-ninth as large

E) cannot be determined

A) unchanged

B) increased by less than 50%

C) increased by 50%

D) increased by more than 50%

E) cannot be determined

A) $1.50

B) $2.00

C) $3.00

D) $150.00

E) not enough data to determine

A) $400

B) $800

C) $1200

D) Zero; this is a class C item.

E) Cannot be determined because unit price is not known.

A) all 4000 units at one time

B) 200 units per order

C) every 20 days

D) 10 times per year.

E) none of the above

A) The reorder point is that quantity that triggers an action to restock an item.

B) There is a reorder point even if lead time and demand during lead time are constant.

C) The reorder point is larger than d x L if safety stock is present.

D) The fixed-period model has no reorder point.

E) All of the above are true.

A) what is the lowest amount of inventory necessary to satisfy a certain service level

B) what is the lowest purchasing price

C) whether to use fixed-quantity or fixed-period order policy

D) how many units should be ordered

E) what is the shortest lead time

A) One hundred is the reorder point, and 14 is the order quantity.

B) Fourteen is the reorder point, and 100 is the order quantity.

C) The number 100 is a function of demand during lead time.

D) Fourteen is the safety stock, and 100 is the reorder point.

E) None of the above is true.

A) It applies only to items produced in the firm's own production departments.

B) It relaxes the assumption that all the order quantity is received at one time.

C) It relaxes the assumption that the demand rate is constant.

D) It minimizes the total production costs.

E) It minimizes inventory.

A) The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous.

B) Because receipt is noninstantaneous, some units are used immediately, not stored in inventory.

C) Average inventory is less than one-half of the production order quantity.

D) All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity.

E) None of the above is false.

A) 139

B) 174

C) 184

D) 365

E) 548

A) 61

B) 245

C) 300

D) 306

E) 490

A) housing costs

B) material handling costs

C) labor cost

D) parts cost

E) pilferage, scrap, and obsolescence

A) is always an EOQ quantity

B) minimizes the sum of holding and ordering costs

C) minimizes the unit purchase price

D) may be a quantity below that at which one qualifies for that price

E) minimizes the sum of holding, ordering, and product costs

A) The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs.

B) In inventory management, item cost becomes relevant to inventory decisions only when a quantity discount is available.

C) If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule.

D) The larger annual demand, the less attractive a discount schedule will be.

E) The smaller the ordering cost, the less attractive a discount schedule will be. for independent demand

A) 8 units

B) 10 units

C) 16 units

D) 64 units

E) Cannot be determined without lead time data.

A) 41

B) 55

C) 133

D) 140

E) 165

A) about 18

B) about 24

C) about 32

D) about 38

E) more than 40

A) replace failed units with good ones

B) eliminate the possibility of a stockout

C) eliminate the likelihood of a stockout due to erroneous inventory tally

D) control the likelihood of a stockout due to the variability of demand during lead time

E) protect the firm from a sudden decrease in demand

A) minimizing an expected stockout cost

B) carrying sufficient safety stock so as to eliminate all stockouts

C) meeting 95% of all demands

D) setting the level of safety stock so that a given stockout risk is not exceeded

E) minimizing total costs

A) increasing the EOQ

B) placing an extra order

C) raising the selling price to reduce demand

D) adding safety stock

E) reducing the reorder point

A) 7 units

B) 10 units

C) 13 units

D) 16 units

E) 26 units

A) 28 units

B) 30 units

C) 49 units

D) 59 units

E) 114 units

A) 15 units

B) 100 units

C) 154 units

D) 500 units

E) 13,125 units

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

B) this model is used for products that have large standard deviations of demand

C) this model is used for products that require very high service levels

D) replenishment is not instantaneous

E) setup costs and holding costs are large

A) Christmas trees

B) canned food at the grocery store

C) automobiles at a dealership

D) metal for a manufacturing process

E) gas sold to a gas station

A) inventory has limited value after a certain period of time

B) it has the largest EOQ sizes

C) demand is unknown

D) supply is limited

E) all of the above

A) .60

B) .20

C) .84

D) .40

E) unable to determine given the above information

A) .5

B) 0

C) .07

D) 1

E) unable to determine given only the above information

A) the chance of stocking out

B) the chance of not stocking out

C) something that should be minimized in retail

D) calculated as the cost of a shortage divided by (the cost of overage + the cost of shortage) for single- period models

E) B and D

A) 5

B) 4

C) 6

D) 7

E) unable to determine with the above information

A) it involves higher ordering costs than the fixed quantity inventory system

B) additional inventory records are required

C) the average inventory level is decreased

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

E) orders usually are for larger quantities

A) order size

B) order spacing

C) maximum service level

D) A and B

E) all of the above

A) perpetual inventory system

B) constant order spacing

C) variable lead time

D) constant demand

E) all of the above

A) fixed quantity, fixed period

B) variable demand, constant demand

C) variable lead time, variable demand

D) variable quantity, variable period

E) None of the above is accurate

A) lead time

B) demand

C) order size

D) order spacing

E) safety Stock

A) the supplier will be more cooperative

B) there is no physical count of inventory items when an item is withdrawn

C) no inventory records are required

D) orders usually are for smaller order quantities

E) the average inventory level is reduced