Q&A Hero

Q: Integration with which of the following functions is required for an effective ERP system? A. Finance/accounting. B. Marketing/sales. C. Human resources. D. All of the above.

Q: When MRP is extended all the way to the final customer, this is called A. customer requirements planning. B. order release planning. C. enterprise resource planning. D. distribution requirements planning.

Q: The purpose of lot sizing in MRP is to A. avoid the need for fixed lot sizes by allowing adjustable lots (lot-for-lot). B. adjust orders to match the gross requirement, eliminating the need to carry ending inventory. C. promote economical production lots and purchasing orders. D. do all of the above.

Q: An MRP system makes it possible to A. manage thousands of products and parts in an environment of unpredictable demand and shifting priorities. B. translate the parts explosion into a master production schedule to satisfy the aggregate planning requirements. C. shift the demand for finished products from independent to dependent demand. D. do all of the above.

Q: A manufacturing execution system (MES) A. is another name for a shop floor control system. B. provides information on job priorities using dispatching rules. C. supports managers in the adjustment of lead times to meet customer needs. D. has all of the above features.

Q: The purpose of the shop floor control subsystem is to A. ensure there is adequate capacity to meet the needs of the master production schedule. B. manage the many orders placed with external suppliers. C. release and manage orders to make sure they are completed on time. D. perform all of the above .

Q: Which of the following statements is correct regarding the use of an MRP system? A. Many firms have insisted their suppliers also install MRP systems. B. MRP has essentially eliminated the need for engineering change order systems. C. With MRP, all component, part, and raw material inventories are managed with order-point systems. D. All of the above are correct.

Q: Which of the following statements is correct regarding the impact of an MRP system on the purchasing function? A. Past-due orders are eliminated for the most part. B. Suppliers have more confidence in the validity of orders they receive. C. The amount of order expediting is dramatically reduced. D. All of the above are correct.

Q: Which of the following would NOT likely be included in a typical computerized inventory record? A. Lead times and standard costs for each item. B. A complete materials plan for each item. C. A history of changes and demand patterns for each item. D. All of the above are typically included.

Q: Which of the following is correct regarding future demand for component parts? A. Future demand in an order-point system is based on the master production schedule. B. Future demand in an MRP system is based on the past history of demand for each component part. C. Future demand in an MRP system is based on the master production schedule. D. None of the above.

Q: The main problem with the traditional annual physical inventory count is A. closing the inventory warehouse for the time needed to conduct the physical inventory count. B. reconciling the physical inventory count with up to date BOMs. C. many of the people assigned to this task are inexperienced and make errors. D. none of the above.

Q: Which of the following is NOT an element of an MRP system? A. Inventory record. B. Shop floor control. C. Capacity planning system. D. Sales and operations planning system.

Q: End item A requires three component parts: B, C, and D. The BOM indicates that for each completed A, 1 unit of B, 2 units of C, and 1 unit of D are required. Current inventory for the four items is as follows: there are 15 As, 40 Bs, 50 Cs, and 15 Ds in stock. If the lead time for all items is 1 week and there are no scheduled receipts for any item, how many units of product A can be delivered to customers at the start of next week (week 2) if you realize now the BOM has just been changed? You now realize it takes 2 units of B to make 1 finished unit of A. A. 10 units B. 15 units C. 20 units D. 25 units

Q: 29. Using a lot-for-lot ordering strategy for the following item, what is the planned order release amount in week 3? (Note: Use a lead time of one week and the gross requirements and scheduled receipts depicted below, and assume you begin with 50 units in inventory.) Week 1 2 3 4 Gross requirements 0 100 80 15 Scheduled receipts 25 0 0 0 Projected ending inventory (50) Net requirements Planned order receipts Planned order releases A. 0 units B. 5 units C. 15 units D. 80 units

Q: The master production schedule (MPS) for two products, A and B, is shown below. To manufacture item A, two units of component C are required. To manufacture item B, four units of component C are required. The inventory balance for C is 10 units at the start of week 1. Using this information, determine the gross requirements for component C to start week 1. MPS Week 1 Product A 15 Product B 2 A. 15 units B. 28 units C. 38 units D. 48 units

Q: Which of the following is NOT a major element considered in MRP implementation? A. Adequate computer support. B. Available data. C. Management support. D. User knowledge, including those outside operations.

Q: Which of the following statements about safety stock within an MRP system is NOT correct? A. When maintained, safety stock is normally held for end items rather than lower-level items in the BOM because end items experience uncertain independent demand. B. Carrying safety stock may represent a common solution for variable product scrap rates. C. Safety lead time may be a more cost-effective solution than safety stock for purchased materials that are subject to variable delivery times. D. Safety capacity as an alternative to safety stock is widely applied in industry.

Q: A bill of materials A. is a structured list of all the materials or parts needed to produce one unit of a finished product. B. is rarely revised once established. C. will lead to sufficient MRP system performance as long as the threshold degree of accuracy of approximately 75% is met. D. is used as an input for dispatching decisions on the shop floor.

Q: Which of the following statements is INCORRECT concerning MRP systems? A. MRP systems are useful in managing dependent demand inventories. B. MRP systems utilize requirements type of ordering philosophy while managing inventories. C. MRP systems are best suited for managing lumpy demand patterns. D. The ABC classification principle is used for managing inventories in MRP systems.

Q: Which of the following statements concerning MRP systems is FALSE? A. MRP is a computer-based inventory planning and control information system designed to handle production scheduling of dependent-demand inventories for batch systems. B. MRP is designed to determine how much is needed and when the need occurs for items that experience dependent demand (components, subassemblies, parts, and raw materials). C. MRP systems are based on a replenishment philosophy, which indicates that material should be ordered when stock runs low. D. The ordering philosophy of MRP may result in lumpy demand for component parts.

Q: End item A requires three component parts: B, C, and D. The bill of materials indicates that for each completed A, one unit of B, 2 units of C, and 1 unit of D are required. Current inventory for the four items is as follows: there are 18 As, 40 Bs, 50 Cs and 35 Ds in stock. If the lead time for all items is one week and there are no scheduled receipts for any item, how many units of product A can be delivered to customers at the start of next week (week 2)? A.13 B.25 C.31 D.43

Q: The master production schedule for Product A shows a need for 30 units, and Product B shows a need of 25 units. To manufacture a unit of Product A, three units of component C are required. To manufacture a unit of Product B, four units of component C are required. Determine the gross requirements for component C to complete production. A.55 B.190 C.110 D.380 E.None of the above.

Q: Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items. Each of these items has a unique demand pattern and may require a different kind of inventory management system. The annual demand pattern and the unit cost of these items are given in the following table. Conduct an ABC inventory analysis and classify these items into A, B, and C type of inventories. Suggest suitable methods for managing these three distinct types of inventories: Item Unit Cost Annual Usage (in units) 1 $1.50 5,000 2 $8.00 1,500 3 $10.50 10,000 4 $2.00 6,000 5 $0.50 7,500 6 $13.60 6,000 7 $0.75 5,000 8 $1.25 4,500 9 $2.50 7,000 10 $2.00 3,000

Q: A smaller lot size would result in fewer orders and increased inventory levels.

Q: Hybrid inventory management systems can be derived by combining the benefits of both P and Q types of inventory management systems.

Q: A decrease in an item's lead time will increase the amount of safety stock required to maintain a constant service level.

Q: Assuming that we are currently placing orders in EOQ amounts, an increase in the order quantity would increase annual ordering costs.

Q: The EOQ formula could be modified to express demand and the carrying rate on a monthly basis.

Q: In an ABC classification, it is logical to employ a periodic review system to monitor A items.

Q: In general, it is extremely difficult to estimate stockout costs and hence we use the desired service levels while computing the reorder points.

Q: The average inventory level is defined as the difference between the cycle stock and the safety stock.

Q: Dependent demand items are subject to market forces and often have predictable demand patterns.

Q: Transit inventories are also referred to as pipeline inventories because they consist of materials that are on their way from one point to another point in the supply chain.

Q: Which of the following factors is most important in determining the reorder point? A. Carrying cost. B. Item cost. C. Order (or setup) cost. D. Desired service level.

Q: The economic order quantity (EOQ) model for determining order lot size shows the basic trade-off between which two variables? A. Demand rate and lead time. B. Order frequency and inventory level. C. Demand rate and inventory level. D. Order frequency and demand rate.

Q: An inventory management system based on a requirements philosophy creates orders from A. customer requests. B. forecasts. C. sales and operations plan (S&OP). D. master production schedule.

Q: Traditional ABC classification means that inventory A. is subject to the principles of activity-based costing. B. is managed according to the first in, first out (FIFO) rule. C. is tightly controlled for the A, B, and C classes of inventory. D. is classified according to demand times cost (demand * cost).

Q: The Cowboy Saddle Company manufactures plastic saddles that are used in the assembly process of their Mr. Ed doll. If the run time for producing a batch of saddles is 4 days, the rate of production is uniform at 500 saddles per day, and the uniform usage rate is 200 saddles per day, what is the maximum inventory quantity? (Round to the nearest integer value.) A. 900 saddles. B. 1,200 saddles. C. 1,500 saddles. D. 1,800 saddles.

Q: Given that unit item cost = $30, annual carrying charge = 15%, annual demand = 3,600 units, and ordering cost = $15 per order, the EOQ A. is 84.85 units. B. is 154.92 units. C. is 200 units. D. cannot be determined from the information given.

Q: Which of the following statements is NOT true about vendor managed inventory (VMI)? A. VMI is another means of managing inventory. B. VMI does not provide suppliers with access to the firms inventory and forecast data. C. VMI requires collaboration between the supplier and the customer in terms of sharing data. D. VMI is used in grocery stores for some food items, with the supplier stocking the store.

Q: Inventory turnover for a given period can be measured as A. the ratio between the total sales and the total profit derived by selling the goods. B. the ratio between the cost of goods sold and the total profit derived by selling the goods. C. the ratio between the cost of goods sold and the average inventory investment. D. the ratio between the total inventory investment and the average inventory investment.

Q: Which of the following statements concerning differences between continuous review (Q systems) and periodic review (P systems) inventory systems is FALSE? A. P systems require a perpetual inventory count, while Q systems require a periodic inventory counting system. B. In periodic review systems, orders are placed after an elapsed period, P, has passed, for a variable quantity of units. C. In continuous review systems, orders are placed for a fixed quantity of goods after a variable length of time has passed. D. Higher than normal demand during the order cycle leads to a shorter time between orders for Q systems, while in P systems it leads to larger order sizes.

Q: 41. If the standard deviation of lead time demand is 10 units, management has a preferred service level of 99.9% (z = 3), and holding costs are $0.75 per unit per month, the annual cost of holding safety stock for this product will approximate to A. $22.50. B. $270.00. C. $90.00. D. $89.91.

Q: Assume uniform annual demand for an item is 50,000 units, order costs are $10.00, and the annual cost of holding one unit in inventory is 5% of the $20.00 acquisition cost. The optimal order quantity is A. 100.00 units. B. 224.00 units. C. 1,000 units. D. 448.00 units.

Q: 38. Inventory position or stock position is defined as A. inventory on hand demand rate. B. inventory on hand + inventory on order. C. inventory on hand inventory on order. D. inventory on hand + replenishment rate.

Q: Which of the following statements about service level in a fixed order quantity inventory system is FALSE? A. Service level is the probability that lead time demand will not exceed the reorder level quantity. B. Service level policies typically compare the percentage of demand that is met from inventory with the cost of holding inventory. C. A 95% service level implies that 95% of the time 100% of demand is satisfied. D. There is a linear relationship between service level and reorder level.

Q: Which of the following statements is INCORRECT regarding the EOQ model? A. EOQ assumes that the lead times are known and fixed. B. EOQ assumes that the demand rates are constant and are known in advance. C. EOQ calculations are based on a constant unit item cost and do not take discounts or rebates into consideration D. The ordering cost or the setup cost is dependent on the number of items ordered or manufactured.

Q: Which of the following statements about ABC inventory classification schemes is FALSE? A. A items typically represent the smallest group in terms of the number of items. B. As little as 1020% of the items may account for 6080% of the annual dollar use. C. A items often justify perpetual inventory recordkeeping. D. ABC systems typically have more than three classes.

Q: Correctly complete the following statements. Independent demand and dependent demand differ in that A. independent demand is certain and is determined from a planned production schedule for finished goods, while dependent demand is uncertain and therefore needs to be forecast. B. inventory levels of independent demand items may be managed with a requirements philosophy, while inventory levels of dependent demand items may be managed by a replenishment philosophy. C. finished goods typically experience independent demand, while components of a product experience dependent demand. D. service firms experience dependent demand, while manufacturing firms experience independent demand.

Q: Inventory cost structures incorporate four types of costs. Which of the following is NOT one of those four? A. Crash (expedite) cost. B. Item (acquisition) cost. C. Order (setup) cost. D. Stockout cost.

Q: Primary reasons to hold inventory include all of the following EXCEPT A. to achieve economies of scale. B. to protect against anticipated changes in demand or supply. C. to decrease inventory turnover ratio. D. to provide for transit.

Q: Demand for an item is 20 units per week, and delivery lead time is 2 weeks. The safety stock is known to be 14 units. Using a P system, and assuming a P value of 3 weeks, what is the target inventory level (T)? A. Less than 50. B. Between 50 and 100 (including the values of 50 and 100). . More than 100. D. None of the above.

Q: Service levels are A. the percentage of time the system has an item on hand. B. the percentage of demand filled from stock. C. the probability that all orders are filled from stock. D. all of the above.

Q: 27. If the actual order quantity Q is much larger than the economic order quantity, A. the firm is paying high annual holding costs. B. the firm is paying high annual ordering costs. C. the firm is paying total costs that are equivalent to EOQ costs. D. the firm should change its EOQ.

Q: Safety stock inventory is A. equivalent to the economic order quantity. B. providing for inventory that is in transit from one location to another. . maintained to absorb uncertainty in, for example, delivery lead time from suppliers. D. all of the above.

Q: If the economic order quantity for an item is 140, what is the average number of cycle inventory units? A.There are no units in cycle inventory. .70 units. C.140 units. D.More than 140 units.

Q: The choice between P and Q systems should be based on A.timing of replenishment. B.type of record keeping. C.cost of the item. D.all of the above.

Q: In the basic EOQ model, if the lead time doubles, the EOQ will A.decrease by half. B.double. C.remain the same. D.increase, but not double.

Q: ABC analysis requires that inventory be classified according to A.alphabetical order by item name. B.annual dollar usage. C.activity-based costs. D.due date.

Q: A paint supplier that places orders for different colors of paint for delivery at the same time should use a A.P system. B.Q system. C.dependent demand inventory model. D.quantity discount model.

Q: Which of the following statements is true about a Q system? A.It does not have a reorder point but rather a target inventory. B.The system is completely determined by the two parameters Q and R. C.It does not have an EOQ because the quantity varies according to demand. D.The order interval is fixednot the order quantity.

Q: In the basic EOQ model, if annual demand and carrying costs double, the EOQ A.doubles. B.increases, but less than double. C.decreases. D.remains the same.

Q: Which of the following is NOT an assumption of the basic EOQ model? A.Annual demand is constant and known. B.Lead time is constant and known. C.No stockouts are allowed. D.Quantity discounts are available.

Q: Independent demand inventory consists of A.inventory whose demand comes from independent suppliers. B.inventory that is independent of any known rules of demand and supply. C.demand that is related to the demand for another item. D.inventory whose demand is determined by market conditions outside the firm.

Q: Transportation cost is an example of A.item cost. B.ordering cost. C.carrying cost. D.storage cost.

Q: A computerized inventory system checks inventory levels at the end of the week and produces suggested orders for the coming week. What kind of system is this? A.A periodic review system. B.A continuous review system. C.A service level system. D.An ABC inventory system.

Q: Which of the following is NOT a purpose of inventory? A.To protect against uncertainties. B.To allow economic production of batches. C.To provide for transit. D.To decrease obsolescence.

Q: A particular brand of soap has a lead time of three weeks to reorder, a weekly standard deviation of 10 units, and a weekly average usage of 30 units. The reorder point for this soap, assuming a 95% service level (z = 1.645), is A.16.45 units. B.28.50 units. C.106.45 units. D.118.49 units.

Q: The total cost per year for Question 9, assuming no stockouts, A.cannot be determined from the given information. B.is approximately equal to $273.86. C.is approximately equal to $547.72. D.is approximately equal to $2,738.60. E. is approximately equal to$5,477.20.

Q: Given that unit cost = $25, annual carrying charge = 10%, annual demand = 4,000 units, and ordering cost = $15 per order, the EOQ is A.22 units. B.155 units. C.219 units. D.300 units.

Q: Which of the following statements is NOT true about managing inventory in supply chains? A.In a supply chain, a single firm typically controls all of the inventories that are required while manufacturing a product. B.Coordination among supply chain partners is essential while managing inventory across the supply chain. C.The total cost minimization approach can be applied while managing inventory across the supply chain. D.Vendor-managed inventory is an initiative shifting responsibility for managing inventory to suppliers.

Q: Which cost defines the cost of capital? A.Item cost. B.Storage cost. C.Deterioration cost. D.Opportunity cost of investment in inventory.

Q: Which cost is NOT part of inventory ordering costs? A.Transportation costs. B.Obsolescence costs. C.Setup costs. D.Receiving costs.

Q: Capacity, as opposed to inventory, A.is the rate at which a stock can be depleted. B.covers anticipated changes in demand or supply. C.consists of resources that provide the potential to produce items. D.is a stock of raw materials, work in process, or finished goods used to facilitate production or satisfy customer demands.

Q: In a Q system, average inventory A.is depleted at a constant rate. B.is set to cover average demand over the lead time plus the review interval. C.is relatively flat in the neighborhood of the minimum. D.tends to be less than under a system of periodic review (P system).

Q: Unlike a requirements philosophy of inventory management, a replenishment philosophy A.calls for orders based on higher-level items. B.applies to raw materials inventories. C.is appropriate given independent demand. D.causes demand to be dependent.

Q: The carrying cost for inventory consists of which cost components? A.Capital cost, obsolescence cost, and ordering cost. B.Obsolescence cost, capital cost, and stockout cost. C.Obsolescence cost, storage cost, and capital cost. D.Storage cost, handling cost, and obsolescence cost.

Q: Of the cost elements making up total inventory cost, which is the most difficult to estimate? A.Stockout costs. B.Holding costs. C.Carrying costs. D.Item cost.

Q: The planning phase begins with the construction of a work breakdown structure.

Q: Crashing a project requires shortening activities that are not on the critical path.