Deck 6: Independent Demand Inventory

Question 1

In cycle inventory,larger orders result in higher cycle inventory,whereas smaller orders result in lower cycle inventory.

Answer 1

True

Question 2

Pipeline inventory consists of orders that have been placed but not yet received.

Answer 2

True

Question 3

The amount of inventory carried and the amount of storage and handling required is positively correlated.

Answer 3

True

Question 4

Inventory shrinkage occurs when products in inventory become physically smaller.

Question 5

A program to reduce transportation costs for a manufacturer by requiring shipments of full trucks would probably have little effect on inventory levels.

Question 6

The amount of inventory carried and the amount of taxes assessed on the inventory are often positively correlated.

Question 7

For cycle inventory,the maximum amount is on hand at the beginning of the order cycle.

Question 8

Cycle inventory varies in proportion to the time of the order.

Question 9

Continuous review inventory systems are often called economic order quantity systems or Q-systems.

Question 10

A direct result of increasing safety stock is generally improved customer service and a reduction in stockouts.

Question 11

Services need to inventory supplies that are necessary to keep the business running.

Question 12

Key decisions for a continuous review system relate to the order quantity and the reorder point.

Question 13

Purchased items like books,food,cars,TVs,or computers are generally considered to have independent demand.

Question 14

WIP is necessary in most manufacturing,service,and supply chain contexts to allow for fluctuations in demand and variations in production time.

Question 15

Inventory systems specify what type of items should be ordered.

Question 16

Inventory systems are of no use to service organizations.

Question 17

Holding inventory in stock for future use at a time when demand will exceed available capacity is pipeline inventory.

Question 18

Eliminating inventory is feasible for most companies,in particular for companies that utilize lean production.

Question 19

The main difference between a continuous review system and a periodic review system is that a periodic system always orders the same quantity of items.

Question 20

Independent demand describes demand for items that are used to make another item or are considered to be component parts.

Question 21

ABC inventory systems are based on the concept that all items kept in inventory are equally important.

Question 22

Which of the following is generally not a reason to reduce inventory?

A)To minimize interest paid on operating capital
B)To minimize the cost of storage and handling
C)To minimize property taxes and insurance premiums
D)To increase customer service levels
E)To minimize shrinkage and spoilage

Question 23

Three common technologies that companies employ for managing inventory are ERP,EDI,and RFID.

Question 24

The EOQ minimizes the total annual cost of ordering and holding inventory for a particular item.

Question 25

Which of the following types of inventory is used to improve customer service and reduce stockouts resulting from unpredictable changes in demand,lead time,or supply?

A)Cycle inventory
B)Safety stock inventory
C)Anticipation inventory
D)Pipeline inventory
E)Remanufactured inventory

Question 26

A periodic review system requires a precise counting of inventory only at specific times.

Question 27

Items that are considered end items that go directly to a customer are considered to have what kind of demand?

A)Independent
B)Dependent
C)Aggregate
D)Correlated
E)Intermittent

Question 28

A scheduled receipt is an order that has been promised to a customer but is currently not in inventory.

Question 29

Which of the following types of inventory consists of products that have been used by a customer and then reacquired by a company for resale?

A)Cycle inventory
B)Safety stock inventory
C)Anticipation inventory
D)Pipeline inventory
E)Remanufactured inventory

Question 30

An inventory review system that always orders the same quantity of items but may have differing periods of time between orders has what type of review system?

A)Aggregate
B)Declining
C)Accelerating
D)Continuous
E)Perpetual

Question 31

The reorder point is the time between when an order is placed and when it is expected to arrive or be finished.

Question 32

The optimal total annual inventory cost occurs when the holding cost equals the ordering costs.

Question 33

Which of the following is generally not a reason to carry inventory?

A)To minimize setup and ordering cost
B)To minimize customer service levels
C)To maximize labor and equipment utilization
D)To minimize transportation costs
E)To minimize cost of materials

Question 34

In manufacturing,which of the following is not considered a type of inventory?

A)Raw materials
B)WIP
C)Finished goods
D)Transport items
E)Supplies

Question 35

Quantity discounts are offered to take advantages of the economies of scale.

Question 36

The primary objective of an inventory system is to determine

A)When items should be ordered and how they should be shipped.
B)What products will sell and what quantity is required.
C)When items should be ordered and what quantity should be ordered.
D)Who an order should be placed with and how many are needed.
E)What quantity is required and where the order should be stored.

Question 37

Inventory position describes the location of any given inventory.

Question 38

What kind of demand can be derived from a "parent" item or can be a component part?

A)Independent
B)Dependent
C)Correlated
D)Aggregate
E)Intermittent

Question 39

Carrying a very large amount of safety stock will minimize stockouts and inventory costs.

Question 40

What items are often kept in inventory for a service company?

A)MRO
B)RFID
C)EOQ
D)QFD
E)ROP

Question 41

Provide four reasons to reduce inventory.

Question 42

Identify a difference relating to order quantity,order timing,updating databases,and inventory size between a continuous review inventory system and a periodic review inventory system.

Question 43

The time during which safety stock must protect against running out of stock is known as the ____.

A)Protection interval
B)Cycle-service interval
C)Demand interval
D)Confidence interval
E)Prediction interval

Question 44

Provide five reasons to carry inventory.

Question 45

The total annual inventory cost will be minimized when the holding cost is equal to what?

A)The EOQ amount
B)The ordering cost
C)The safety stock
D)The annual demand
E)The inventory position cost

Question 46

When does a base stock system issue an order for inventory?

A)At the end of the period
B)Whenever a withdrawal is made
C)When a bin is empty
D)When the amount in inventory reaches amount "x"
E)When the purchasing agent notices it needs to be

Question 47

The time between when an order is placed and when it is expected to arrive is the ____,when demand is certain.

A)Reorder point
B)Schedule receipt
C)Backorder
D)Lead time
E)On-hand time

Question 48

Briefly describe the "Wal-Mart Effect."

Question 49

The newsvendor problem helps to model inventory for what type of products?

A)Expensive items
B)Important items
C)Inexpensive items
D)Perishable items
E)Any type of item

Question 50

Which of the following is an approach to inventory management that recognizes that different items have different values and levels of importance?

A)Bin system
B)Can-order system
C)RFID system
D)ABC system
E)One-for-one system

Question 51

Which of the following describes a continuous review system?

A)Q is variable.
B)An order is made in the period.
C)The database is updated at the end of the period.
D)Inventory is generally lower than in other systems.
E)All of these options describe a continuous system.

Question 52

Identify six basic types of inventory.

Question 53

Which of the following is not a component of total inventory cost?

A)Annual demand
B)Order quantity
C)Inventory position
D)Ordering cost
E)Overhead cost

Question 54

Cycle counting is used to ensure ____.

A)Depreciation
B)Shortage costs
C)Inventory accuracy
D)Order quantities
E)Overtime

Question 55

Your on-hand inventory plus outstanding orders minus any backorder quantities is your ____.

A)Annual demand
B)Order quantity
C)Inventory position
D)Ordering cost
E)Holding cost

Question 56

Which is the information system used for minimizing inventory cost?

A)ERP system
B)RFID system
C)EDI system
D)VMI system
E)EOQ system

Question 57

A fixed-period inventory review system is also called

A)Aggregate
B)Declining
C)Accelerating
D)Continuous
E)Perpetual

Question 58

Why would a company offer discounted pricing for items that they sell?

A)To take advantage of economies of scale
B)To minimize the shipping quantity
C)To discourage large orders
D)To maximize setup time
E)All of these options are reasons for discounting price

Question 59

The total annual inventory cost will be minimized when the lot size equals what amount?

A)Demand
B)Holding cost
C)Economic order quantity
D)Ordering cost
E)Minimum batch cost

Question 60

An example of this is when an employee of Pepsi visits a grocery store and stocks the allotted shelf space with Pepsi products.

A)Contracted inventory
B)Allotted inventory
C)Controlled inventory
D)Vendor-managed inventory
E)Electronic data inventory

Question 61

A components manufacturer uses approximately 20,000 units annually of an item.They are used at a steady rate during the 250 workdays that the plant operates.The price of each item is $7.00,and the annual carrying cost is $0.50 per unit per year.The ordering cost is $50.What is the annual ordering costs?

Question 62

What is the amount of pipeline inventory if 15 units are used per day,90 units can be produced per day,and the shipping time by ship,train,and truck is 30 days between the production facility and the customer?

Question 63

What is the total inventory cost if annual demand is 75,000 units per year,the order quantity is 2,400 units,the holding cost is $0.375 per unit,and the ordering costs are $14.40?

Question 64

If cycle inventory has an order quantity of 550 units,what is the average inventory,assuming that the demand rate is constant and uniform?

Question 65

Describe a bin system.

Question 66

What is the inventory position if 5000 units are physically available,1000 units have been ordered but are in transit,no units are on backorder,and forecasted demand for the next period is 7000 units?

Question 67

Describe three ways to improve inventory accuracy.

Question 68

A components manufacturer uses approximately 20,000 units annually of an item.They are used at a steady rate during the 250 workdays that the plant operates.The price of each item is $7.00,and the annual carrying cost is $0.50 per unit per year.The ordering cost is $50.What is the economic order quantity?

Question 69

Describe a base stock system.

Question 70

Describe the objective of the newsvendor problem.

Question 71

A components manufacturer uses approximately 20,000 units annually of an item.They are used at a steady rate during the 250 workdays that the plant operates.The price of each item is $7.00,and the annual carrying cost is $0.50 per unit per year.The ordering cost is $50.What is the time between orders?

Question 72

Classify each part as an A,B,or C inventory item on the basis of the annual dollar value.

Question 73

If a product has a lead time that is normally distributed,the mean of the product demand is 100 units,and the standard deviation is 40 units,what would the reorder point be to maintain a 97% service level?

Question 74

A product has demand of 40 units during the lead time (normally distributed),with a standard deviation of 10.What is the safety stock inventory if the organization wants to achieve a 90% cycle-service level?

Question 75

Describe an ABC inventory system.