Q&A Hero

Q: In the single-period model, if excess cost is double the shortage cost, the approximate stockout risk, assuming an optimum service level, is ___ percent. A. 100 B. 67 C. 50 D. 33 E. 5

Q: In a single-period model, if shortage cost is four times excess cost, then the optimum service level is ___ percent. A. 100 B. 80 C. 60 D. 40 E. 20

Q: In a single-period model, if shortage and excess costs are equal, then the optimum service level is: A. 0. B. .33. C. .50. D. .67. E. .75.

Q: Which of these products would be most apt to involve the use of a single-period model? A. gold coins B. hammers C. fresh fish D. calculators E. frozen corn

Q: All of the following are possible reasons for using the fixed-order-interval model except: A. supplier policy encourages use. B. grouping orders can save in shipping costs. C. the required safety stock is lower than with an EOQ/ROP model. D. it is suited to periodic checks of inventory levels rather than continuous monitoring. E. continuous monitoring is not practical.

Q: A. 20 times 2 B. 20 times 10 C. 2 times the square root of 20 D. 2 times the square root of 10 E. 400 times the square root of 10

Q: A. 60 times 2 B. 60 times the square root of 2 C. 60 times the square root of 10 D. 60 times 10 E. 10 times the square root of 2

Q: Which one of the following is implied by an annual service level of 95 percent? A. Approximately 95 percent of demand during lead time will be satisfied. B. The probability is .95 that demand will exceed supply during lead time. C. The probability is .95 that demand will equal supply during lead time. D. The probability is .95 that demand will not exceed supply during lead time. E. Approximately 95 percent of all demand will actually be satisfied directly from on-hand inventory.

Q: Which one of the following is implied by a lead time service level of 95 percent? A. Approximately 95 percent of demand during lead time will be satisfied. B. Approximately 95 percent of inventory will be used during lead time. C. The probability is .95 that demand during lead time will exactly equal the amount on hand at the beginning of lead time. D. The probability is .95 that demand during lead time will not exceed the amount on hand at the beginning of lead time. E. The probability is .95 that the order will arrive after the on-hand inventory is exhausted.

Q: If average demand for an inventory item is 200 units per day, lead time is three days, and safety stock is 100 units, the reorder point is: A. 100 units. B. 200 units. C. 300 units. D. 600 units. E. 700 units.

Q: If no variations in demand or lead time exist, the ROP will equal: A. the EOQ. B. expected usage during lead time. C. safety stock. D. the service level. E. the EOQ plus safety stock.

Q: Which one of the following is not generally a determinant of the reorder point? A. rate of demand B. length of lead time C. lead time variability D. stockout risk E. purchase cost

Q: In the quantity discount model, with carrying cost stated as a percentage of unit purchase price, in order for the EOQ of the lowest curve to be optimum, it must: A. have the lowest total cost. B. be in a feasible range. C. be to the left of the price break quantity for that price. D. have the largest quantity compared to other EOQs. E. have smaller ordering costs than the others.

Q: A fill rate is the percentage of _____ filled by stock on hand. A. shipments B. demand C. inventory D. safety stock E. lead time

Q: The introduction of quantity discounts will cause the optimum order quantity to be: A. smaller. B. unchanged. C. greater. D. smaller or unchanged. E. unchanged or greater.

Q: Given the same demand, setup/ordering costs, and carrying costs, the EPQ calculated using incremental replenishment will be ____________ if instantaneous replenishment was assumed. A. greater than the EOQ B. equal to the EOQ C. smaller than the EOQ D. greater than or equal to the EOQ E. smaller than or equal to the EOQ

Q: Which of the following is not true for the economic production quantity model? A. Usage rate is constant. B. Production rate exceeds usage rate. C. Run size exceeds maximum inventory. D. There are no ordering or setup costs. E. Average inventory is one-half maximum inventory.

Q: In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately: A. 11. B. 20. C. 24. D. 28. E. 375.

Q: In the basic EOQ model, if D = 60 per month, S = $12, and H = $10 per unit per month, EOQ is: A. 10. B. 12. C. 24. D. 72. E. 144.

Q: In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of: A. 20. B. square root of 200. C. 200. D. 400. E. 600.

Q: In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will: A. double. B. increase, but not double. C. decrease by a factor of 2. D. remain the same. E. increase, but more information is needed to calculate exactly how much.

Q: In the basic EOQ model, if annual demand doubles, the effect on the EOQ is: A. It doubles. B. It is four times its previous amount. C. It is half its previous amount. D. It is about 70 percent of its previous amount. E. It increases by about 40 percent.

Q: A risk avoider would want ______ safety stock. A. less B. more C. the same D. zero E. 50 percent

Q: A cycle count program will usually require that A items be counted: A. daily. B. once a week. C. monthly. D. quarterly. E. more often than annually.

Q: In a supermarket, a vendor's restocking the shelves every Monday morning is an example of: A. safety stock replenishment. B. economic order quantities. C. reorder points. D. fixed order intervals. E. blanket ordering.

Q: Which is not a true assumption in the EOQ model? A. Production rate is constant. B. Lead time does not vary. C. No more than three items are involved. D. Usage rate is constant. E. No quantity discounts.

Q: The EOQ model is most relevant for which one of the following? A. ordering items with dependent demand B. determination of safety stock C. ordering perishable items D. determining fixed-interval order quantities E. determining fixed order quantities

Q: The purpose of cycle counting is to: A. count all the items in inventory. B. count bicycles and motorcycles in inventory. C. reduce discrepancies between inventory records and actual quantities. D. reduce theft. E. count 10 percent of the items each month.

Q: In the A-B-C classification system, items which account for 60 percent of the total dollar volume for few inventory items would be classified as: A. A items. B. B items. C. C items. D. A items plus B items. E. B items plus C items.

Q: In the A-B-C classification system, items which account for 15 percent of the total dollar volume for a majority of the inventory items would be classified as: A. A items. B. B items. C. C items. D. A items plus B items. E. B items plus C items.

Q: In an A-B-C system, the typical percentage of the number of items in inventory for A items is about: A. 10. B. 30. C. 50. D. 70. E. 90.

Q: Which of the following is least likely to be included in order costs? A. processing vendor invoices for payment B. processing purchase order C. inspecting incoming goods for quantity D. taking an inventory to determine how much is needed E. temporary storage of delivered goods

Q: Dairy items, fresh fruit, and newspapers are items that: A. do not require safety stocks. B. cannot be ordered in large quantities. C. are subject to deterioration and spoilage. D. require that prices be lowered every two days. E. have minimal holding costs.

Q: When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves: A. line up. B. equal zero. C. do not line up. D. cannot be calculated. E. depend on the percentage assigned.

Q: In a two-bin inventory system, the amount contained in the second bin is equal to the: A. ROP. B. EOQ. C. amount in the first bin. D. optimum stocking level. E. safety stock.

Q: A nonlinear cost related to order size is the cost of: A. interest. B. insurance. C. taxes. D. receiving. E. space.

Q: Which of the following interactions with vendors would potentially lead to inventory reductions? A. reduced lead times B. increased safety stock C. less frequent purchases D. larger batch quantities E. longer order intervals

Q: Which of the following is not one of the assumptions of the basic EOQ model? A. Annual demand requirements are known and constant. B. Lead time does not vary. C. Each order is received in a single delivery. D. Quantity discounts are available. E. Ordering and holding costs have been estimated reasonably accurately.

Q: Weekly demand for a particular item averages 30 units, with a standard deviation of 4. This item is managed with a fixed-order-interval model. The order interval is three weeks, and this item has a certain lead time of one week. The desired service level is 97.5 percent. Assume that it is now time to place another order, and there are 43 units on hand. How many units should be ordered? A. 120 B. 93 C. 136 D. 46 E. 84

Q: Average demand for a particular item is 1,200 units per year. It costs $100 to place an order for this item, and it costs $24 to hold one unit of this item in inventory for one year. If the fixed-order-interval model is chosen in this instance, how often (on average) will this item be ordered? A. once a month B. once every other month C. twice a month D. twice every three months E. three times every two months

Q: If there are shipping cost economies that result from bundling orders for different items together, the __________ model becomes a relatively more attractive option. A. multi-period B. reorder-point C. fixed-order-quantity D. fixed-order-interval E. multi-item

Q: Even though it is often the case that no cash outflows result when demand exceeds capacity, __________ can nevertheless be experienced in those circumstances. A. foreorder costs B. service costs C. shortage costs D. holding costs E. setup costs

Q: Which of the following is typically the largest of all inventory costs? A. shortage cost B. purchase cost C. holding cost D. ordering cost E. pipeline cost

Q: A stock or store of goods is called a(n): A. bundler. B. servicer. C. retailer. D. supply chain. E. inventory.

Q: Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.

Q: Cycle counting can be used in motorcycle inventory control.

Q: The two basic issues in inventory are how much to order and when to order.

Q: The calculation of safety stock requires knowledge of demand and lead time variability.

Q: Safety stock eliminates all stockouts.

Q: It is critical that the exact quantity calculated in the EOQ model be ordered.

Q: A quantity discount will lower the reorder point.

Q: In the single-period model, the service level is the probability that demand will not exceed the stocking level in any period.

Q: When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill.

Q: The basic EOQ model ignores the purchasing cost.

Q: A single-period model would be used mainly by organizations going out of business.

Q: Monitoring inventory turns over time can be used as a measure of performance.

Q: The single-period model can be very helpful in determining how much to order.

Q: The single-period model can be very helpful in determining when to order.

Q: The fixed-order-interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.

Q: Discrete stocking levels are used when an organization does not want visibility of inventory levels.

Q: The fixed-order-interval model requires a continuous monitoring of inventory levels.

Q: In the fixed-order-interval model, the order size is the same for each order.

Q: Profit margins tend to be inversely related to inventory turns.

Q: ROP models assume that demand during lead time is composed of a series of dependent daily demands.

Q: Solving quality problems can lead to lower inventory levels.

Q: Variability in demand and/or lead time can be compensated for by safety stock.

Q: Safety stock is held because we anticipate future demand.

Q: The inventory value of the supply chain exceeds the inventory value of the organization's work-in-process inventory.

Q: The rate of demand is an important factor in determining the ROP.

Q: When to order can be calculated by the ROP and expressed as a quantity.

Q: ROP models indicate to managers the time between orders.

Q: In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

Q: 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.

Q: Because price is not a factor in the EOQ formula, quantity discounts will not affect EOQ calculations.

Q: The total cost curve is relatively flat near the EOQ.

Q: Annual ordering cost is inversely related to order size.

Q: Understocking an inventory item is a sure sign of inadequate inventory control.

Q: Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost.

Q: The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.

Q: The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.