Question 1

In the context of ABC inventory analysis,which of the following statements is true of class A items?
A) They require close control by operations managers.
B) They comprise less than 30 percent of the total dollar usage.
C) They can be managed using automated computer systems.
D) They account for more than 50 percent of inventory items.

Accepted Answer

Class A items are the most important items in terms of dollar usage and require close control by operations managers. They typically account for around 80 percent of the total dollar usage and are managed manually to adjust inventory levels and avoid stockouts.

Question 2

Single-period inventory models are used in situations involving items that can be carried in inventory and sold in future periods.

Accepted Answer

Single-period inventory models are used for items that cannot be carried over into future periods, such as perishable goods or items for a specific event.

Question 3

In a fixed-order-quantity system,when demand is uncertain,using economic order quantity (EOQ)based only on the average demand will result in a low probability of a stockout.

Accepted Answer

EOQ assumes that demand is constant and known, but in reality, demand is often uncertain. Using only the average demand to calculate EOQ can result in stockouts if demand fluctuates above the average. Therefore, safety stock or reorder point should also be taken into account to reduce the risk of stockouts.

Question 4

In the Pareto Principle,a vital few control a high percentage of the wealth.

Accepted Answer

The Pareto Principle, also known as the 80/20 rule, suggests that roughly 80% of effects come from 20% of causes, often applied to wealth distribution where a small percentage of people control a large portion of the wealth.

Question 5

CraftWare Inc.,a furniture manufacturer,uses ABC analysis to define its inventory value.The inventory contains wood,cast iron,adhesive,and carbon fiber.If wood accounts for 50 percent of the items and 5 percent of the total dollar value; carbon fiber accounts for 10 percent of the items and 60 percent of the total dollar value; cast iron accounts for 25 percent of the items and 18 percent of the total dollar value; and adhesive accounts for 15 percent of the items and 17 percent of the total dollar value,_____ can be classified as a class C item.
A) wood
B) carbon fiber
C) cast iron
D) adhesive

Accepted Answer

Wood, with 50 percent of the items but only 5 percent of the total dollar value, fits the profile of a Class C item, which is characterized by a high percentage of items but a low percentage of the total value.

Question 6

In the context of fixed-quantity systems,_____ is defined as the on-hand quantity (OH)plus any orders placed but which have not arrived minus any backorders (BO).
A) inventory position
B) the reorder point
C) a stock-keeping unit
D) work-in-process inventory

Accepted Answer

Inventory position is calculated as the on-hand quantity plus any orders placed but not yet received, minus any backorders.

Question 7

In the context of ABC inventory analysis,which of the following statements is true of class C items?
A) They require close control by operations managers.
B) They comprise more than 80 percent of the total dollar usage.
C) They can be managed using automated computer systems.
D) They make up less than 10 percent of inventory items.

Accepted Answer

Class C items in ABC inventory analysis are typically low-cost items that represent a small portion of the total dollar usage but a large portion of the inventory items. They can often be managed more efficiently through automated systems due to their lower criticality and higher volume.

Question 8

_____ inventory consists of partially completed products in various stages of completion that are awaiting further processing.
A) Raw materials
B) Work-in-process
C) Finished-goods
D) Safety stock

Accepted Answer

Work-in-process inventory consists of partially completed products that are awaiting further processing.

Question 9

Vision Toys uses a fixed-quantity system to manage its inventories.The inventory includes plastic and LED bulbs.It was observed that the company often faces stockout of plastic.The average weekly demand for plastic is 100 pounds,and historical data show that the standard deviation of weekly demand is about 7.The lead time from the plastic supplier is 2 weeks.If the company's acceptable service level is 95 percent and the number of standard deviations necessary to achieve the acceptable service level is 1.645,the reorder point for plastic with safety stock is:
A) less than or equal to 125 pounds.
B) more than 125 pounds but less than or equal to 175 pounds.
C) more than 175 pounds but less than or equal to 225 pounds.
D) more than 225 pounds.

Accepted Answer

Reorder point = (Average weekly demand x Lead time) + (Number of standard deviations x Standard deviation of weekly demand)
Reorder point = (100 x 2) + (1.645 x 7)
Reorder point = 200 + 11.515
Reorder point = 211.515
Adding safety stock, the reorder point will be more than 211.515 pounds. 
Therefore, the correct answer is option C, which states that the reorder point will be more than 175 pounds but less than or equal to 225 pounds.

Question 10

In the context of inventory costs,_____ costs are incurred as a result of the work involved in configuring tools,equipment,and machines within a factory to produce an item.
A) setup
B) holding
C) stockout
D) unit

Accepted Answer

Setup costs are incurred when preparing equipment and machinery to produce a specific item, involving tasks like configuring tools and machines.

Question 11

_____ applies to inventory situations in which one order is placed for a good in anticipation of a future selling season where demand is uncertain.
A) A fixed-period inventory system
B) A fixed-quantity inventory system
C) The deliver-lag inventory model
D) The single-period inventory model

Accepted Answer

The single-period inventory model applies to situations where there is uncertainty in demand for a product during a specific selling season. It involves ordering a specific quantity of goods to meet demand in anticipation of the selling season. It is a one-time order and there is no opportunity to replenish inventory once the selling season is over.

Question 12

Stable demand is usually called _____ demand.
A) static
B) overfull
C) unwholesome
D) dynamic

Accepted Answer

Stable demand is referred to as static demand because it does not fluctuate significantly over time.

Question 13

The demand for trains between Marshdell and Deepbarrow varies throughout the year.The demand reaches its peak in summer and drops during winter.This demand for trains can be categorized as _____ demand.
A) static
B) overfull
C) unwholesome
D) dynamic

Accepted Answer

The demand for trains between Marshdell and Deepbarrow changes with the seasons, increasing in summer and decreasing in winter, which characterizes it as dynamic demand.

Question 14

Radio-frequency identification (RFID)chips allow firms to track individual containers.

Accepted Answer

RFID chips contain a unique identifier that allows firms to track individual containers or products as they move through the supply chain.

Question 15

The demand for bread in Ahoma City ranges from 100 to 120 tons per day,every day of the year.The demand is easily satisfied on a daily basis.This demand for bread can be categorized as _____ demand.
A) static
B) overfull
C) unwholesome
D) dynamic

Accepted Answer

The demand for bread in Ahoma City is consistent and predictable, ranging between 100 to 120 tons per day, which characterizes it as static demand.

Question 16

Marketing and operations prefer high inventory levels,whereas finance would prefer small inventories.

Accepted Answer

Marketing and operations departments often prefer high inventory levels to ensure product availability and meet customer demand promptly, while the finance department typically prefers smaller inventories to reduce holding costs and free up capital.

Question 17

The single-period inventory model applies to inventory situations where demand is uncertain.

Accepted Answer

The single-period inventory model is used when demand for a product is uncertain and only one order can be placed before the selling season. This model helps to determine the optimal order quantity that maximizes profit or minimizes the risk of stockouts.

Question 18

In the context of using technology to manage inventories,radio-frequency identification (RFID)chips offer an accuracy of less than 70 percent.

Accepted Answer

This statement is false. RFID chips offer an accuracy rate of over 90 percent, making them a reliable technology for inventory management.

Question 19

A single-period inventory problem can be solved using a technique called _____ analysis.
A) marginal economic
B) total cost
C) critical value
D) reorder point

Accepted Answer

Marginal economic analysis is a technique used to solve single-period inventory problems. It involves comparing the marginal cost of holding inventory with the marginal benefit of holding inventory to determine the optimal inventory level.

Question 20

Setup costs include costs associated with maintaining storage facilities,such as gas and electricity,taxes,and insurance.

Accepted Answer

Setup costs are specifically related to the costs of configuring or preparing machinery, equipment, or production lines for manufacturing a new product batch or order, not the ongoing costs of maintaining storage facilities.

Quiz 12: Managing Inventories in Supply Chains

In the context of ABC inventory analysis,which of the following statements is true of class A items?

Single-period inventory models are used in situations involving items that can be carried in inventory and sold in future periods.

In a fixed-order-quantity system,when demand is uncertain,using economic order quantity (EOQ)based only on the average demand will result in a low probability of a stockout.

In the Pareto Principle,a vital few control a high percentage of the wealth.

In the context of fixed-quantity systems,_____ is defined as the on-hand quantity (OH) plus any orders placed but which have not arrived minus any backorders (BO) .

In the context of ABC inventory analysis,which of the following statements is true of class C items?

_____ inventory consists of partially completed products in various stages of completion that are awaiting further processing.

In the context of inventory costs,_____ costs are incurred as a result of the work involved in configuring tools,equipment,and machines within a factory to produce an item.

_____ applies to inventory situations in which one order is placed for a good in anticipation of a future selling season where demand is uncertain.

Stable demand is usually called _____ demand.

The demand for trains between Marshdell and Deepbarrow varies throughout the year.The demand reaches its peak in summer and drops during winter.This demand for trains can be categorized as _____ demand.

Radio-frequency identification (RFID)chips allow firms to track individual containers.

The demand for bread in Ahoma City ranges from 100 to 120 tons per day,every day of the year.The demand is easily satisfied on a daily basis.This demand for bread can be categorized as _____ demand.

Marketing and operations prefer high inventory levels,whereas finance would prefer small inventories.

The single-period inventory model applies to inventory situations where demand is uncertain.

In the context of using technology to manage inventories,radio-frequency identification (RFID)chips offer an accuracy of less than 70 percent.

A single-period inventory problem can be solved using a technique called _____ analysis.

Setup costs include costs associated with maintaining storage facilities,such as gas and electricity,taxes,and insurance.