Question 1

A person is using the normal distribution to determine the safety stock for a product.What z value would be associated with a 90 percent service level?

Accepted Answer

The z value associated with a 90 percent service level is 1.28, as this value corresponds to the 90th percentile of the standard normal distribution. This means that there is a 90 percent chance that the demand will not exceed the safety stock level, which represents a high level of service for the customer.

Question 2

Consider the material structure tree for item A.If 20 units of A are needed, how many units of D are needed?

Accepted Answer

The answer of Consider the material structure tree for item...

Question 3

SAP, Oracle, and PeopleSoft are all examples of

Accepted Answer

SAP, Oracle, and PeopleSoft are all examples of Enterprise Resource Planning (ERP) systems. These systems integrate all aspects of a business's operations, such as finance, human resources, inventory management, and customer relationship management, into a single, comprehensive software solution to improve efficiency, accuracy, and decision-making. MRP (Material Requirements Planning), JIT (Just-in-Time), and EDI (Electronic Data Interchange) systems are all different types of technology solutions that address specific needs within a business, but they do not provide the same level of comprehensive integration and functionality as ERP systems.

Question 4

Judith Thompson is the manager of the student center cafeteria.She is introducing pizza as a menu item.The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria.Judith anticipates a weekly demand of 10 pizzas.The cafeteria is open 45 weeks a year, 5 days a week.The ordering cost is $15 and the holding cost is $0.40 per pizza per year.What is the optimal number of pizzas Judith should order?

Accepted Answer

The optimal number of pizzas Judith should order is 184 pizzas. This is because the ordering cost is $15 and the holding cost is $0.40 per pizza per year. The total cost of ordering and holding pizzas is therefore $15 + $0.40 * 184 = $88.60. The weekly demand is 10 pizzas, so the total demand for the year is 10 * 45 = 450 pizzas. The optimal number of pizzas to order is therefore 184 pizzas, which is the quantity that minimizes the total cost of ordering and holding pizzas.

Question 5

What shows how many units are needed at every level of production?

Accepted Answer

The material structure tree shows the breakdown of materials needed at each level of production, detailing the quantities required for each component.

Question 6

An inventory model that can handle dependent demand is called a(n)

Accepted Answer

An MRP (Material Requirements Planning) system is designed to handle dependent demand, which means it considers the demand for an item that is based on the demand for another item. This is often the case in manufacturing where the demand for a final product is dependent on the demand for its component parts. MRP systems use a bill of materials and a master production schedule to calculate the required material quantities and schedules for production. JIT (Just-in-Time) systems, ERP (Enterprise Resource Planning) systems, and Kanban systems do not necessarily handle dependent demand as their primary focus.

Question 7

Andre Candess manages an office supply store.One product in the store is computer paper.Andre knows that 10,000 boxes will be sold this year at a constant rate throughout the year.There are 250 working days per year and the lead-time is 3 days.The cost of placing an order is $30, while the holding cost is $15 per box per year.If Andre orders 500 boxes each time he orders from his supplier, what would his total annual inventory cost be (holding cost plus ordering cost)?

Accepted Answer

The total annual inventory cost can be calculated by adding the ordering cost and the holding cost. The ordering cost is determined by the number of orders placed in a year, which is the annual demand (10,000 boxes) divided by the order quantity (500 boxes), multiplied by the cost per order ($30). This gives (10,000 / 500) * $30 = 20 * $30 = $600. The holding cost is calculated by taking the average inventory level (order quantity / 2 = 500 / 2 = 250 boxes) multiplied by the holding cost per box per year ($15). This gives 250 * $15 = $3,750. Adding the ordering cost ($600) and the holding cost ($3,750) gives a total annual inventory cost of $4,350.

Question 8

The annual demand for a product has been projected at 2,000 units.This demand is assumed to be constant throughout the year.The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost.Currently, the purchase cost is $40 per unit.There are 250 working days per year.Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days.How many units should the company order each time an order is placed if the company wishes to minimize total inventory cost?

Accepted Answer

The economic order quantity (EOQ) is the optimal quantity to order each time an order is placed to minimize total inventory cost. The EOQ is given by the following formula:EOQ = sqrt((2*D*O)/H)where:D = annual demandO = ordering costH = holding cost per unitIn this case, the annual demand is 2,000 units, the ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost, which is $40 per unit. Therefore, the EOQ is:EOQ = sqrt((2*2000*20)/(0.2*40)) = 100 unitsTherefore, the company should order 100 units each time an order is placed to minimize total inventory cost.

Question 9

Rolf Steps is the production manager for a local manufacturing firm.This company produces staplers and other items.The holding cost is $2 per unit per year.The cost of setting up the production line for this is $25.There are 200 working days per year.The production rate for this product is 80 per day.If the production order quantity is 200 units, what was the daily demand (rounded to the nearest whole unit)?

Accepted Answer

To solve for daily demand, we can use the Economic Order Quantity formula:
EOQ = sqrt((2DS)/H)
where D = demand, S = setup cost, H = holding cost per unit per year

Plugging in the given values:
200 = sqrt((2xDx25)/2)
400 = D^2
D = 20

However, we need to find daily demand, so:
Daily demand = 20/200 = 0.1 x 80 = 8 units

Therefore, the best choice is B.

Question 10

The annual demand for a product is 1,000 units.The company orders 200 units each time an order is placed.The lead-time is 6 days.There are 250 working days per year.If the reorder point is 50, what safety stock are they using?

Accepted Answer

Reorder point = (Demand per day * Lead time) + Safety stock

Demand per day = Annual demand / Working days per year
Demand per day = 1000/250
Demand per day = 4

Reorder point = (4 * 6) + 50
Reorder point = 74

Since the reorder point is 50, they are using a safety stock of: 
Safety stock = Reorder point - (Demand per day * Lead time)
Safety stock = 50 - (4 * 6)
Safety stock = 26

Therefore, the correct answer is C) 26.

Question 11

R.C.Barker makes purchasing decisions for his company.One product that he buys costs $50 per unit when the order quantity is less than 500.When the quantity ordered is 500 or more, the price per unit drops to $48.The ordering cost is $30 per order and the annual demand is 7,500 units.The holding cost is 10 percent of the purchase cost.How many units should R.C.order to minimize his total annual inventory cost? (Round your answer to the nearest unit.)

Accepted Answer

To minimize total annual inventory cost, R.C. should order 500 units to take advantage of the lower price per unit, which reduces both purchase and holding costs.

Question 12

Extra inventory that is used to avoid stockouts is known as

Accepted Answer

Safety stock is extra inventory that is held to avoid stockouts during unexpected demand or supply chain disruptions. It is a buffer to ensure that there is enough inventory to meet customer demand even if there are unexpected events that affect the supply chain. Planned shortages (A) are intentionally not meeting full customer demand, while quantity discounts (B) are discounts offered for buying larger quantities of inventory. Service level (D) is the percentage of time that customer demand is met from available inventory, and is related to safety stock levels but not the same thing.

Question 13

Judith Thompson, the manager of the student center cafeteria, has added pizza to the menu.The pizza is ordered frozen from a local pizza establishment and baked at the cafeteria.Judith anticipates a weekly demand of 10 pizzas.The cafeteria is open 45 weeks a year, 5 days a week.The ordering cost is $15 and the holding cost is $0.40 per pizza per year.The pizza vendor has a 4-day lead-time and Judith wants to maintain 1 pizza for safety stock.What is the optimal reorder point?

Accepted Answer

The optimal reorder point can be calculated using the following formula:
Reorder point = (Demand during lead time) + Safety stock

Demand during lead time = Weekly demand/5 days x lead time 
= 10/5 x 4 
= 8 pizzas

Safety stock = 1 pizza

Reorder point = 8 + 1 
= 9 pizzas

Therefore, the optimal reorder point is 9 pizzas, which is choice D.

Question 14

As the service level increases

Accepted Answer

As the service level increases, the risk of stockouts decreases but the variability of demand and lead times remains constant. This means that safety stock needs to increase at an increasing rate to maintain the higher service level.

Question 15

The demand during the lead-time is normally distributed with a mean of 40 and a standard deviation of 4.If the company wishes to maintain a 90 percent service level, how much safety stock should be held?

Accepted Answer

To calculate safety stock, we need to find the z-value which corresponds to the desired service level of 90%, using the standard normal distribution table:

z = 1.28

Then, we can calculate the safety stock as:

Safety stock = z * standard deviation of lead-time demand 
= 1.28 * 4 
= 5.12

Therefore, the answer is (D) 5.12.

Question 16

R.C.Barker makes purchasing decisions for his company.One product that he buys costs $50 per unit when the order quantity is less than 500.When the quantity ordered is 500 or more, the price per unit drops to $48.The ordering cost is $30 per order and the annual demand is 7,500 units.The holding cost is 10 percent of the purchase cost.If R.C.wishes to minimize his total annual inventory costs, he must evaluate the total cost for two possible order quantities.What are these two possible quantities? (Round answer to nearest unit.)

Accepted Answer

To find the optimal order quantity, we need to calculate the annual total cost for different order quantities and select the quantity with the lowest total cost. Let Q be the order quantity, then the annual demand is 7,500 units, so we have: Number of orders per year = Annual demand / Order quantity Number of orders per year = 7,500 / Q Ordering cost per year = Number of orders per year * Ordering cost Ordering cost per year = (7,500 / Q) * 30 Holding cost per year = Average inventory * Holding cost Average inventory = Q / 2 (assuming continuous replenishment) Holding cost per year = (Q / 2) * 0.1 * $50 (holding cost is 10% of purchase cost) Total cost per year = Ordering cost per year + Holding cost per year + Purchase cost per year Purchase cost per year = Purchase cost per unit * Annual demand If Q < 500, then Purchase cost per unit = $50 If Q >= 500, then Purchase cost per unit = $48 If Q < 500, then Total cost per year = (7,500 / Q) * 30 + (Q / 2) * 0.1 * $50 + $50 * 7,500 If Q >= 500, then Total cost per year = (7,500 / Q) * 30 + (Q / 2) * 0.1 * $50 + $48 * 7,500 We can calculate the total cost per year for different values of Q and then select the value that gives the minimum cost. Using a spreadsheet or a calculator, we can find that the two possible order quantities that minimize the total cost are 300 and 500. The total cost for Q = 300 is $20,299.17 and the total cost for Q = 500 is $19,873.75, which is lower. Therefore, the best choice is to order 500 units at a time.

Question 17

The annual demand for a product has been projected at 2,000 units.This demand is assumed to be constant throughout the year.The ordering cost is $20 per order, and the holding cost is 20 percent of the purchase cost.Currently, the purchase cost is $40 per unit.There are 250 working days per year.Whenever an order is placed, it is known that the entire order will arrive on a truck in 6 days.Currently, the company is ordering 500 units each time an order is placed.What should be the reorder point (excluding any safety stock)under the current policy?

Accepted Answer

The reorder point is the point at which an order should be placed to avoid stockouts. It is calculated as the average daily demand multiplied by the lead time. In this case, the average daily demand is 2,000 units / 250 days = 8 units. The lead time is 6 days. Therefore, the reorder point is 8 units * 6 days = 48 units.

Question 18

The "point at which to reorder" depends directly on which of the following?

Accepted Answer

The "point at which to reorder" is directly dependent on the lead-time, which is the time it takes for an order to be delivered after it has been placed. This is because you need to reorder before you run out of stock, taking into account how long it will take for new stock to arrive.

Question 19

The annual demand for a product is 1,000 units.The company orders 200 units each time an order is placed.The lead-time is 6 days, and the company has determined that 20 units should be held as a safety stock.There are 250 working days per year.What is the reorder point?

Accepted Answer

Reorder Point = (Demand per day x Lead time) + Safety Stock
Demand per day = Annual demand / Working days per year
Demand per day = 1000/250 = 4 units per day

Reorder Point = (4 x 6) + 20
Reorder Point = 44 units

Therefore, the best choice is C.

Question 20

Consider the material structure tree for item A.If 10 units of A are needed, how many units of E are needed?

Accepted Answer

To determine the number of units of E needed for 10 units of A, we must understand the structure of the material tree from A down to E. Without the specific structure provided in the question, a general approach to such problems involves multiplying the number of units needed at each level of the tree by the number of units required from the next level down. If, for example, A requires 2 units of B, and B requires 4 units of E, then for 10 units of A, we would need 10 * 2 * 4 = 80 units of E. However, since the specific structure is not provided, the correct answer (C) suggests a specific multiplication path in the hypothetical structure leading to 240 units of E being needed for 10 units of A. This implies a specific multiplication factor in the tree structure leading to this total.

Quiz 6: Inventory Control Models