Deck 9: Inventory Management Fundamentals and Independent Demand

Question 1

Products sent directly to customers and not placed in finished goods inventory are known as

A)finished goods inventory.
B)work-in-process inventory.
C)make-to-stock inventory.
D)make-to-order inventory.

Answer 1

D

Question 2

A store of goods and stocks for some future use is known as ________.

Answer 2

inventory

Question 3

Service level is the probability that an item will be available in stock for order fulfillment.

Answer 3

True

Question 4

The probability that an item will be available in stock for order fulfillment when it is needed is known as ________.

Question 5

Production smoothing is balancing the cost of set-ups with inventory carrying costs.

Question 6

Products that are waiting to be sold to customers are known as

A)finished goods inventory.
B)work-in-process inventory.
C)make-to-stock inventory.
D)make-to-order inventory.

Question 7

Inventory that is completed and placed into inventory for sale at a later date is known as

A)buffer inventory.
B)work-in-process inventory.
C)make-to-stock inventory.
D)make-to-order inventory.

Question 8

Hallmark manufactures greeting cards throughout the year,building up inventory during lean periods to be utilized during the holiday period.They are using a technique known as ________.

Question 9

Manufacturers that order supplies from their vendors every Monday in order to stabilize purchasing and shipping schedules are using a

A)fixed time period model.
B)continuous review model.
C)Monday ordering model.
D)inventory buffer model.

Question 10

Producing extra inventory during periods of low demand,which is then consumed during periods of high demand,is known as ________.

Question 11

Building up inventory in anticipation of unforeseen global supply chain interruptions is known as ________.

Question 12

Inventory models that order in regular weekly or monthly time intervals are known as ________ models.

Question 13

Producing extra inventory during periods of low demand,which is then consumed during periods of high demand is known as

A)production smoothing.
B)production hedging.
C)production buffering.
D)production stocking.

Question 14

In fixed time period inventory models,inventory is reordered when it reaches a predetermined stock level.

Question 15

Manufacturers of seasonal demand products who manufacture the product throughout the year,so as to build up an inventory buffer to be used during the high demand season are using a technique called

A)production smoothing.
B)production hedging.
C)production buffering.
D)production stocking.

Question 16

Inventory that is kept at the intersection of differing stages of production to maintain continuity of processing is called hedge inventory.

Question 17

The period between placing and receiving an order is known as ________.

Question 18

Inventory that has been received and is in the production phase is known as

A)raw material inventory.
B)work-in-process inventory.
C)make-to-stock inventory.
D)make-to-order inventory.

Question 19

In fixed time period inventory models,inventory is reordered

A)as required.
B)when stock reaches a predetermined level.
C)at regular time intervals.
D)at midnight-when time is fixed.

Question 20

Inventory that has been received and is in the production phase is known as phased in inventory.

Question 21

Walmart Stores sell the popular Tide detergent brand supplied by Procter and Gamble (P&G).In this case P&G owns and also manages the inventory; however,the inventory is housed in Walmart Stores.Such an arrangement is called

A)Vendor-managed Inventory (VMI).
B)Supplier's Replenishment Inventory (SRI).
C)Kanban Management Inventory (KMI).
D)Safety Stock Inventory (SSI).

Question 22

Materials stored to support the functioning of the business are known as ________.

Question 23

If a firm turns over inventory once a week,they would have 7 days' worth of inventory on hand.

Question 24

If a firm turns over inventory once a week,they would have ________ inventory turns per year.

Question 25

The rate at which firms use up their inventory is known as economic inventory rate.

Question 26

Classic Car Dealers has an average of 150 cars in inventory.They sold 3000 cars this past year.Assuming 365 days in a work year,how many days' worth of inventory do they carry on average?

A)10 days
B)15 days
C)18 days
D)25 days

Question 27

Vendor-managed inventory is always consignment inventory.

Question 28

Inventory turnover is

A)average inventory divided by cost of goods sold.
B)average inventory divided by annual sales.
C)cost of goods sold multiplied by annual sales.
D)cost of goods sold divided by average inventory.

Question 29

Inputs to production that take the form of either fundamental supplies or subassemblies and components received from suppliers are known as ________.

Question 30

Inventory that is completed and placed into inventory for sale at a later date is known as ________ inventory.

Question 31

Products that are waiting to be sold to customers are known as ________ inventory.

Question 32

If a firm has annual cost of goods sold of $100 million and turn over inventory twice a month,the average inventory they carry would be

A)$4.167 million.
B)$50 million.
C)$10 million.
D)$18.37 million.

Question 33

Best Tools maintains an average finished goods inventory of $15 million and its annual cost of goods sold is $180 million.How many times per year do they turn over their inventory?

A)8)33
B)12
C)10
D)15

Question 34

Products sent directly to customers and not placed in finished goods inventory are known as ________ inventory.

Question 35

Best Home Cabinets orders wood,their main raw material,from their supplier once every week.The inventory model they are using is known as a ________ model.

Question 36

Best Tools turns over inventory once every month and its annual cost of goods sold is $180 million.The amount of average inventory they carry is ________.

Question 37

The rate at which firms use up their inventory is known as ________.

Question 38

Inventory turnover is the average inventory divided by total sales.

Question 39

Inventory that has been received and is in the production phase is known as ________ inventory.

Question 40

Stock that is owned by the supplier but is in the physical possession of the buyer is known as ________.

Question 41

In managing inventory for independent demand items,the phrase "timing" refers to the decision query "when to place an order."

Question 42

Classic Kitchen cabinets has forecasted demand for 200 cabinets for the upcoming month.Based on this information and knowing that each cabinet requires two knobs,they have forecasted that 400 knobs will be required.What term can be used to describe the demand for the knobs?

A)Sporadic demand
B)Independent demand
C)Co-variance demand
D)Dependent demand

Question 43

Inventory which is managed by the supplier but is housed by the buyer is known as ________.

Question 44

In managing inventory for independent demand items,the two important decision queries that need to be answered are ________.

Question 45

The two important inventory decisions in managing inventory for independent demand items are how much to order and which vendor to use.

Question 46

A repetitive procedure for counting inventory on a regular basis is known as ________.

Question 47

Demand that is calculated from a parent item is called ________.

Question 48

In ABC analysis,inventory items are classified by unit cost,with expensive items being classified as A items,and inexpensive items being classified as C items.

Question 49

In ABC inventory analysis,items that account for sixty percent of the revenue but account for only few inventory items are classified as

A)A items.
B)B items.
C)C items.
D)none of the above.

Question 50

Pareto's law suggests that 80% of the customers will account for 20% of the revenue.

Question 51

Inventory systems in which orders are placed at regular intervals such as weekly or monthly are known as ________ systems.

Question 52

Demand that is calculated from a parent item is called independent demand.

Question 53

Pareto's law suggests that

A)80% of customers account for 20% of revenue.
B)80% of customers account for 80% of revenue.
C)20% of customers account for 80% of revenue.
D)20% of revenue comes from 80% of customers.

Question 54

A supermarket orders inventory every Friday afternoon.What type of inventory systems is the supermarket using?

A)Continuous review
B)Periodic review
C)Continuous replenishment
D)ABC

Question 55

In ABC inventory analysis,items that account for only up to 10% of the revenue but for a majority of the inventory items are classified as

A)A items.
B)B items.
C)C items.
D)none of the above.

Question 56

In a continuous review inventory system,if daily usage is 20 units and lead-time is 5 days,the reorder point will be when on-hand inventory is

A)100 units.
B)4 units.
C)5 units.
D)25 units.

Question 57

In ABC inventory analysis,C items typically represent about 15 percent of the number of items but 80 percent of the usage.

Question 58

In ABC inventory analysis,the typical percentage for the total dollar volume of C items is

A)10%.
B)50%.
C)75%.
D)100%.

Question 59

The periodic review inventory model requires a continuous monitoring of inventory levels.

Question 60

In a continuous review inventory system,the order size is the same for each order.

Question 61

Use the information below to answer the following questions:
The materials manager for a billiard ball maker must periodically place orders for resin,one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day,and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order,and that the lead time for delivery is four (4)days. Assume 365 days in a year.
At what point should resin be reordered?

A)0 kilograms remaining
B)50 kilograms remaining
C)200 kilograms remaining
D)400 kilograms remaining

Question 62

In inventory models,a quantity discount will lower the reorder point.

Question 63

Compute the reorder point when daily demand is 25 units,orders are placed every 15 days,the lead time is 10 days,the desired service level is 98% (which corresponds to 2.06 standard deviations from the mean),50 units are on hand and the standard deviation of daily demand during the uncertainty period is 10 units.

A)525 units
B)678 units
C)362 units
D)475 units

Question 64

Compute the required safety stock when weekly demand is 100 units,lead time is 2 weeks,the desired service level is 98% (which corresponds to 2.06 standard deviations from the mean)and the standard deviation of demand during lead time is 30 units.

A)25 units
B)48 units
C)62 units
D)75 units

Question 65

Use the information below to answer the following questions:
The materials manager for a billiard ball maker must periodically place orders for resin,one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day,and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order,and that the lead time for delivery is four (4)days. Assume 365 days in a year.
What would be the length of an order cycle - i.e.the time between successive orders using the EOQ?

A)10 days
B)20 days
C)25 days
D)30 days

Question 66

In setting the reorder point for an item with variable demand,a service level of 95% will imply which of the following?

A)Stockouts may occur only 5 times during the phase of 100 inventory cycles.
B)5% of the supplier shipments will be late.
C)There is a 0.05 probability that the forecasted demand is not accurate.
D)The forecast demand will be accurate 95% of the time.

Question 67

In the EOQ inventory model,ordering cost is always equal to carrying cost at the EOQ.

Question 68

Inventory systems in which inventory levels are continuously monitored to determine placement of an order are known as ________ systems.

Question 69

Which one of the following is not an assumption of the basic EOQ model?

A)Demand is unknown and variable
B)Lead times are fixed and constant
C)Inventory holding cost is based on average inventory
D)There are no backorders

Question 70

The EOQ inventory model helps determine the quantity to order to minimize costs.

Question 71

Compute the reorder point when weekly demand is 100 units,lead time is 2 weeks,the desired service level is 98% (which corresponds to 2.06 standard deviations from the mean)and the standard deviation of demand during lead time is 30 units.

A)125 units
B)262 units
C)75 units
D)187 units

Question 72

In the Economic Order Quantity (EOQ)model,if lead time increases from five to ten days,what will be the impact on the EOQ?

A)It will double.
B)It will increase,but not double.
C)It will decrease by a factor of two.
D)It will remain unchanged.

Question 73

Use the information below to answer the following questions:
The materials manager for a billiard ball maker must periodically place orders for resin,one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day,and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order,and that the lead time for delivery is four (4)days. Assume 365 days in a year.
What is the economic order quantity (EOQ)for resin?

A)50 kilograms
B)100 kilograms
C)200 kilograms
D)500 kilograms

Question 74

Use the information below to answer the following questions:
The materials manager for a billiard ball maker must periodically place orders for resin,one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day,and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order,and that the lead time for delivery is four (4)days. Assume 365 days in a year.
What is the Total Cost (TC)at the EOQ?

A)$3000
B)$7300
C)$9000
D)$12700

Question 75

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

Question 76

The materials manager for a tire manufacturer must periodically place orders for a key chemical,one of the raw materials used in producing tires.The manager knows that manufacturing uses the chemical at a rate of 300 lbs.each week,and the lead time for delivery is 4 days.Assume that the manufacturing operation runs 5 days a week.At what point should the chemical be reordered?

A)When 0 lbs. are remaining
B)When 240 lbs. are remaining
C)When 375 lbs. are remaining
D)When 1200 lbs. are remaining

Question 77

When determining the Economic Order Quantity (EOQ)with quantity discounts,which cost is included in addition to the costs considered in the basic EOQ formulation?

A)Cost of packing the item
B)Safety stock cost
C)Per-unit cost of the item
D)Inventory cycle count cost

Question 78

Because price isn't a factor in the EOQ formula,quantity discounts won't affect EOQ calculations.

Question 79

In inventory models,the rate of demand is an important factor in determining the reorder point.

Question 80

What will be the effect on total ordering costs (calculated over multiple orders)in an inventory system as the size of each order increases?

A)It will increase.
B)It will decrease.
C)It will remain unchanged.
D)Order size has no effect on ordering costs.