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Q:
The ________ is the average elapsed time between receiving replenishment orders of Q units for a particular lot size.
Q:
In an EOQ model, as the annual holding cost for an item increases, the EOQ for the item ________.
Q:
In an EOQ model, as the ordering cost for an item decreases, the EOQ for the item ________.
Q:
In an EOQ model, as the annual demand for an item increases, the EOQ for the item ________.
Q:
If an item is ordered using an EOQ policy, as the annual demand for an item decreases, the EOQ for the item ________.
Q:
A ________ is an incentive to order larger quantities, where the price per unit decreases when the order is sufficiently large.
Q:
The ________ determines the frequency and quantity to order.
Q:
The number of setups (or orders) per year is determined by the annual demand and ________.
Q:
Use the information in Scenario 9.9 to determine the average pantry space occupied by cat food if each can takes up 13 cubic inches and Geoff obeys an EOQ policy for managing the cat food purchase process.
A) 2.4 cubic feet
B) 24 cubic feet
C) 4.8 cubic feet
D) 12 cubic feet
Q:
Use the information in Scenario 9.9 to determine the amount of time in-between trips to the cat food store if Geoff wisely elects to follow an EOQ policy for obtaining cat food.
A) about three months
B) about three weeks
C) about six months
D) about three days
Q:
Use the information in Scenario 9.9 to determine the combined cost of goods and inventory if Geoff decides to follow the economic order quantity model?
A) $2,415
B) $2,218
C) $2,274
D) $2,330
Q:
Use the information in Scenario 9.9 to determine the annual setup cost if Geoff follows an EOQ policy to obtain cat food.
A) $112
B) $14
C) $28
D) $56
Q:
Scenario 9.9 "Gollee those cats sure go through a lot of food," Geoff exclaimed as he saw the shopping list pad that had been pre-printed with the words "cat food" at the top. He pondered a different approach to shopping for the furry little darlings, reviewed his shopping records, and discovered the following. The price of cat food has held steady at 89 cents per can. Despite feigning indifference, each of the seven cats nibbles their way through an average of one can per day, three hundred sixty five days a year. The price of gasoline has held constant at $3.50 per gallon and his pickup uses a gallon each way to the cat food store. The cost to hold a can of cat food is 10% of the unit price. Use the information in Scenario 9.9 to determine the average number of orders per year if Geoff adopts an EOQ policy. A) 3 orders per year B) 4 orders per year C) five orders per year D) six orders per year
Q:
Scenario 9.8 A company operating under a continuous review system has an average demand of 50 units per week for the item it produces. The standard deviation in weekly demand is 20 units. The lead-time for the item is six weeks, and it costs the company $30 to process each order. The holding cost for each unit is $10 per year. The company operates 52 weeks per year. Use the information in Scenario 9.8. What is the economic order quantity (EOQ) for this item? A) less than or equal to 175 units B) greater than 175 units but less than or equal to 200 units C) greater than 200 units but less than or equal to 225 units D) greater than 225 units
Q:
Scenario 9.7 Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year. Use the information in Scenario 9.7. What is the EOQ for these papers? A) less than or equal to 3,000 units B) greater than 3,000 units but less than or equal to 4,000 units C) greater than 4,000 units but less than or equal to 5,000 units D) greater than 5,000 units
Q:
Scenario 9.6 Consider the following data for an independent-demand item maintained by Angie Bonpensiero, the proprietor of a local auto repair shop: Weekly demand = 50 units Ordering cost = $8/order Holding cost = $4/unit/year Weeks in a year = 50 Use the information in Scenario 9.6. Due to new ordering procedures initiated by Bonpensiero, the ordering cost is drops to $4 per order. At the same time, the weekly demand increases to 64 units per week due to an increase in business. What effect do these changes have on the EOQ quantity for this item? A) The EOQ quantity remains unchanged. B) The EOQ quantity increases by 20%. C) The EOQ quantity decreases by 20%. D) Sufficient information is not available to answering this question.
Q:
An item experiences an annual demand of 7,200 units. It costs $8 to hold an item in inventory for one year and $16 to place an order. If the EOQ model is used, what is the time between orders? Assume that there are 52 business weeks in a year. A) less than 1 week B) greater than 1 week but less than or equal to 2 weeks C) greater than 2 weeks but less than or equal to 3 weeks D) greater than 3 weeks
Q:
A neighborhood sportswear store sells a pair of Victoria sneakers for $40. Due to the recent fitness craze, these shoes are in high demand: 50 pairs of shoes are sold per week. The ordering cost is $20 per order, and the annual holding cost is 20% of the selling price. If the store operates 52 weeks a year, what can you say about the current lot size of 235?
A) too large
B) too small
C) just right
D) cannot tell from the information given
Q:
Scenario 9.5 Tom Bergman, owner and operator of the Earplug Superstore, is reviewing the costs associated with the store's best-selling hearing aid, the BZ15. The data available to Dr. Bergman concerning this device follow. Demand = 25 units/week Order cost = $3/order Holding cost = $1.50/unit/year The Earplug Superstore operates 52 weeks a year. Use the information in Scenario 9.5. If Tom orders such that his annual holding cost is twice what his annual ordering cost is, how many units at a time is he ordering? A) less than or equal to 100 units B) greater than 100 but less than or equal to 105 units C) greater than 105 but less than or equal to 110 units D) greater than 110 units
Q:
Scenario 9.4 The Mwongola Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter", is used for the two most expensive of Burdell's four models, and has an estimated annual demand of 300 units. Burdell estimates the cost to place an order is $40, and the holding cost for each assembly is $60 per year. The company operates 250 days per year. Use the information in Scenario 9.4. The purchasing manager decides that, in order to save purchasing time, orders for the Smooth Shifter will be placed once a month, or twelve times per year. How much does this approach cost Mwongola in additional annual holding and ordering costs (instead of Mwongola ordering using the EOQ quantity)? A) more than $500 B) more than $200 but less than or equal to $500 C) more than $50 but less than or equal to $200 D) less than or equal to $50
Q:
Scenario 9.3 The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. Use the information in Scenario 9.3. The purchasing manager decides that, in order to save purchasing time, orders for the XO-01 will be placed every three months, or four times per year. How much does this approach cost Talbot in total annual holding and ordering costs (instead of Talbot ordering using the EOQ quantity)? A) greater than $18,000 B) greater than $14,000 but less than or equal to $18,000 C) greater than $10,000 but less than or equal to $14,000 D) less than or equal to $10,000
Q:
Vilas County Hospital consumed 400 boxes of bandages per week last year. The price of bandages was $80 per box, and the hospital operates 52 weeks per year. The cost of processing an order was $64, and the cost of holding one box throughout a full year was 20% of the value of the material. Last year the hospital ordered bandages, on average, once every two weeks, each time ordering 800 boxes. What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied? A) less than or equal to $650 B) more than $650 and less than $1,050 C) more than $1,050 and less than $1,450 D) more than $1,450
Q:
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?
A) How critical are errors in estimating demand (D), inventory holding cost (H), and setup cost (S)?
B) What should happen to lot sizes if interest rates drop?
C) What should happen to cycle inventory if the demand rate increases?
D) What should happen to lot sizes if supply and lead-time uncertainty increase?
Q:
The Lemma Company manufactures and sells 10 products. Ways have been found to cut both the setup and inventory holding costs in half. What effect will this have on the economic order quantities of the 10 products?
A) They will be reduced by a factor of 1.41.
B) They will not change.
C) They will be reduced by a factor of 2.00.
D) They will be increased by a factor of 1.41.
Q:
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?
A) Their order quantity will fall and so will the time between orders.
B) Their order quantity will fall but the time between orders will rise.
C) Their order quantity will rise but the time between orders will fall.
D) Their order quantity will rise and so will the time between orders.
Q:
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 would not use the EOQ formula if:
A) you followed a make-to-stock strategy for an item with stable demand.
B) your carrying costs and ordering costs are known and relatively stable.
C) the order size is constrained by capacity limitations such as the number or size of the delivery trucks.
D) your setup costs and holding costs remain constant and can be determined.
Q:
Which one of the following statements concerning the economic order quantity (EOQ) is true?
A) The EOQ is the order quantity that minimizes annual inventory holding costs.
B) An increase in demand will increase the EOQ.
C) The time between orders (TBO) will increase with an increase in holding costs.
D) The EOQ formula assumes that there are only three relevant costs: holding, transportation, and setup.
Q:
Which one of the following statements concerning the economic order quantity (EOQ) model is true?
A) An increase in holding cost will increase the EOQ.
B) A decrease in demand will increase the EOQ.
C) A decrease in holding cost will increase the EOQ.
D) None of the above is true.
Q:
Which one of the following statements regarding the economic order quantity (EOQ) is true?
A) The EOQ model combines several different item orders to the same supplier.
B) If an order quantity is larger than the EOQ, the annual holding cost for cycle inventory exceeds the annual ordering cost.
C) The EOQ model assumes a variable demand pattern.
D) When the interest rate drops, the inventory holding cost decreases and the EOQ decreases.
Q:
Which one of the following is not an assumption of the EOQ model?
A) Decisions for one item can be made independently of decisions made for other items.
B) There is no uncertainty in lead-time.
C) The amount of an order received is exactly equal to what was ordered, without any "short shipments" from a supplier or scrap losses in the shop.
D) Quantity discounts can be taken advantage of for large lot sizes.
Q:
Considering the EOQ model, a reduction in ordering costs justifies reducing the lot size ordered.
Q:
Considering the EOQ model, smaller lots are justified when holding costs are decreased.
Q:
As the annual demand increases, other factors remaining constant, the EOQ also increases.
Q:
The EOQ is the smallest lot size that a supplier will allow a customer to order.
Q:
EOQ should be used if you follow a make-to-stock strategy and the item has relatively stable demand.
Q:
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.
Q:
What is ABC analysis and how does it work?
Q:
Inventory manager George Costanza knows too well that shrinkage occurs so he goes to the stock room every day to do a spot check of a few pre-selected items, physically counting them to verify that his count agrees with the number indicated by their computerized inventory system. This method of inventory control is known as ________.
Q:
In an ABC analysis, class ________ SKUs, which typically make up ________% of the SKUs, account for only about 5% of the dollar usage.
Q:
In an ABC analysis, class ________ SKUs, which typically make up about ________% of the SKUs, account for only about 15% of the dollar usage.
Q:
In an ABC analysis, class ________ SKUs, which typically make up about ________% of the SKUs, account for about 80% of the dollar usage.
Q:
In ABC analysis, class ________ SKUs represent the smallest number of SKUs but the greatest dollar usage.
Q:
ABC analysis is closely related to:
A) three-bin analysis.
B) EOQ analysis.
C) repeatability analysis.
D) Pareto analysis.
Q:
What is generally true about class C SKUs in ABC analysis? They represent about:
A) 20 percent of all SKUs.
B) 30 percent of all SKUs.
C) 5 percent of the dollar usage.
D) 50 percent of the dollar usage.
Q:
What is generally true about class C SKUs in ABC analysis? They represent about:
A) 20 percent of all SKUs.
B) 50 percent of all SKUs.
C) 15 percent of the dollar usage.
D) 50 percent of the dollar usage.
Q:
What is generally true about class B SKUs in ABC analysis? They represent about:
A) 20 percent of all SKUs and about 80 percent of the dollar usage.
B) 80 percent of all SKUs and about 20 percent of the dollar usage.
C) 30 percent of all SKUs and about 15 percent of the dollar usage.
D) 50 percent of all SKUs and about 95 percent of the dollar usage.
Q:
Table 9.1 Inventory records show the following: Series Unit Cost Count Q $1,751.34 6 R $462.00 22 S $88.44 63 T $382.73 14 U $96.42 24 V $38.04 51 W $34.23 17 Use Table 9.1 to identify the best statement. A) Items in series V and Q fall in the same category of an ABC analysis. B) Items in series W and S fall in the same category of an ABC analysis. C) Items in series W and Q fall in the same category of an ABC analysis. D) Items in series S and V should be in the Class B of an ABC analysis.
Q:
What is generally true about class A SKUs in ABC analysis? They represent about: A) 50 percent of all SKUs. B) 80 percent of all SKUs. C) 20 percent of the dollar usage. D) 80 percent of the dollar usage.
Q:
What is generally true about class A SKUs in ABC analysis? They represent about:
A) 20 percent of all SKUs.
B) 30 percent of all SKUs.
C) 20 percent of the dollar usage.
D) 50 percent of the dollar usage.
Q:
Table 9.1 Inventory records show the following: Series Unit Cost Count Q $1,751.34 6 R $462.00 22 S $88.44 63 T $382.73 14 U $96.42 24 V $38.04 51 W $34.23 17 In the context of an ABC inventory classification, use Table 9.1 to ascertain the veracity of this statement. Items in series U are the most C-like of all inventory SKUs.
Q:
Cycle counting is an inventory-control method whereby storeroom personnel physically count a small percent of the total number of items each day.
Q:
When using ABC analysis, class C SKUs should be reviewed frequently.
Q:
ABC analysis is a process for categorizing SKUs according to dollar usage so that managers can focus on items with the highest dollar value.
Q:
A stock-keeping unit (SKU) is a specially designed container for holding a specific amount of an inventory item somewhere along the supply chain.
Q:
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.
Q:
What are the key issues when implementing and operating an inventory control system?
Q:
What are the secondary levers for pipeline inventory?
Q:
What are the secondary levers for safety stock inventory?
Q:
What are the secondary levers for cycle inventory?
Q:
________-demand items are items for which demand is influenced by market conditions and is not related to the inventory decisions for any other item held in stock.
Q:
A ________ lever is one that must be activated if inventory is to be reduced.
Q:
________ are the basic tactics for reducing cycle, safety stock, anticipation, and pipeline inventories in supply chains.
Q:
One of the secondary levers for reducing pipeline inventory is to:
A) offer seasonal pricing plans.
B) increase capacity cushions.
C) accept only large orders.
D) select more responsive suppliers.
Q:
Which of the following does not increase repeatability?
A) parts standardization
B) customization
C) group technology
D) flexible automation
Q:
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:
A) safety stock inventory.
B) cycle inventory.
C) pipeline inventory.
D) anticipation inventory.
Q:
Which of the following is not a lever for reducing cycle inventories?
A) place purchased item orders at fixed intervals
B) reduce lot sizes for items moving in the supply chain
C) streamline methods for placing orders and making machine set ups
D) increase repeatability to eliminate the need for changeovers
Q:
The primary lever to reduce anticipation inventory is to place orders closer to the time when they must be received.
Q:
Repeatability is an undesirable feature of some orders because they must be repeated until the order is filled correctly.
Q:
What are the types of inventory from the perspective of how it is created? Where is each type most likely to exist in the supply chain?
Q:
What are the three types of inventory? For which inventory type is a stockout most critical?
Q:
When considering dependent / independent demand, in the example of tires and automobiles, the original equipment tires represent ________-demand items, while automobiles represent a(n) ________-demand item.
Q:
________ inventory is the inventory moving from point to point in the materials flow system.
Q:
As safety stock increases, the holding cost of that inventory item ________.
Q:
________ inventory is the surplus inventory that a company holds to protect against uncertainties in demand, lead-time, and supply.
Q:
The ________ determines the frequency and quantity to order.
Q:
________ inventory is the portion of total inventory that varies directly with lot size.
Q:
________ consists of items such as components or assemblies needed for a final product in manufacturing.
Q:
________ are inventories needed for the production of goods and services; they are considered to be the inputs to the transformation process.
Q:
Scenario 9.2 Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. The lead time from the plant to the wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant. Refer to Scenario 9.2. Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 400 units? A) The plant shipment lot size of 500 and plant-to-wholesaler lead time of 3 weeks B) The plant shipment lot size of 400 and plant-to-wholesaler lead time of 3 weeks C) The plant shipment lot size of 600 and plant-to-wholesaler lead time of 4 weeks D) The plant shipment lot size of 400 and plant-to-wholesaler lead time of 2 weeks
Q:
Scenario 9.1 Shipments of Product A from a distribution center to a retailer are made in lots of 350. The retailer's average demand for Product A is 75 units per week. The lead time from distributor to retailer is 3 weeks. The retailer pays for the shipments when they leave the distributor. The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350 units per shipment. Refer to Scenario 9.1. The net impact on the retailer will be: A) no net change in average cycle and pipeline inventories. B) a net average increase in cycle and pipeline inventories of 50 units. C) a net average decrease in cycle and pipeline inventories of 75 units. D) a net average decrease in cycle and pipeline inventories of 50 units.