Deck 15: Independent Demand Inventory

Question 1

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

Answer 1

A

Question 2

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
E)None of the above

Answer 2

D

Question 3

Given that unit cost = $25,annual carrying charge = 10%,annual demand = 4000 units and ordering cost = $15 per order,the EOQ is:

A)21.91 units
B)154.92 units
C)219.09 units
D)300 units

Answer 3

C

Question 4

Which cost is classified under the cost of capital?

A)Item cost
B)Storage cost
C)Deterioration
D)Opportunity cost of investment in inventory

Question 5

The total cost per year for question 9,assuming no stockouts,is approximately equal to:

A)The total cost cannot be determined from the given information.
B)$273.86
C)$547.72
D)$2,738.60
E)$5,477.20

Question 6

In the basic EOQ model,if annual demand and carrying charge double,the effect on the EOQ is:

A)It doubles.
B)It is half of its previous amount.
C)It is about 70% of its previous amount.
D)It remains the same.
E)It increases by about 40%.

Question 7

Average inventory under a Q system:

A)Is depleted at a constant rate
B)Is set to cover average demand over lead time plus the review intervals
C)Is relatively flat in the neighborhood of the minimum
D)Tends to be less than under a system of periodic review at fixed internals

Question 8

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)Is all idle resources,except for material,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

Question 9

Which of the following statements is incorrect 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)None of the above

Question 10

The carrying cost consists of the following three 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

Question 11

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

Question 12

Which of the following statements is true about the 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 fixed-not the order quantity.
E)None of the above is true.

Question 13

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
E)None of the above

Question 14

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
E)None of the above

Question 15

Which cost is not considered part of inventory ordering costs?

A)Transportation costs
B)Obsolescence costs
C)Setup costs
D)Receiving costs

Question 16

Unlike the requirements philosophy of inventory management,the 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

Question 17

Which of the following is not a purpose of inventory?

A)To protect against uncertainties
B)To uncouple phases of operations
C)To provide for transit
D)To decrease obsolescence

Question 18

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.
E)The item is a single product; there is no interaction with other products.

Question 19

Transportation cost is an example of:

A)Item cost
B)Ordering cost
C)Carrying cost
D)Stockout cost
E)Storage cost

Question 20

A particular brand of soap has a lead time of three weeks to reorder,a weekly standard deviation of ten 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

Question 21

According to ABC Classification,a periodic review system is employed to monitor the A items.

Question 22

Assuming that we are placing orders currently in EOQ amounts,an increase in the order quantity would increase ordering cost per year.

Question 23

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

Question 24

Dependent demand is subject to market forces and often exhibits a predictable demand pattern.

Question 25

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.

Question 26

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
E)None of the above

Question 27

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

Question 28

A decrease in an item's lead-time will increase the amount of safety stock required.

Question 29

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 600 saddles per day,and the uniform usage rate is 150 saddles per day,what is the maximum inventory quantity? (Round to the nearest integer value)

A)600 saddles
B)1800 saddles
C)2400 saddles
D)3000 saddles

Question 30

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