Question 1

One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing.

Accepted Answer

What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers.

Question 2

In a price-break model of lot sizing, the lowest cost quantity is always feasible.

Accepted Answer

Step 1.Sort the prices from lowest to highest and then, beginning with the lowest price, calculate the economic order quantity for each price level until a feasible economic order quantity is found.By feasible, we mean that the price is in the correct corresponding range.Step 2.If the first feasible economic order quantity is for the lowest price, this quantity is best and you are finished.Otherwise, calculate the total cost for the first feasible economic order quantity (you did these from lowest to highest price) and also calculate the total cost at each price break lower than the price associated with the first feasible economic order quantity.This is the lowest order quantity at which you can take advantage of the price break.The optimal Q is the one with the lowest cost.

Question 3

When developing inventory cost models, which of the following is not included as a costs to place an order?
A)Phone calls
B)Taxes
C)Clerical
D)Calculating quantity to order
E)Postage

Accepted Answer

There are costs to place an order: labor, phone calls, typing, postage, and so on.Therefore, the larger each order is, the fewer the orders that need to be written.Also, shipping costs favor larger orders-the larger the shipment, the lower the per-unit cost.Ordering costs refer to the managerial and clerical costs to prepare the purchase or production order.Ordering costs include all the details, such as counting items and calculating order quantities.The costs associated with maintaining the system needed to track orders are also included in ordering costs.

Question 4

One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation.

Accepted Answer

What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers.

Question 5

Which of the following is not included as an inventory holding cost?
A)Annualized cost of materials
B)Handling
C)Insurance
D)Pilferage
E)Storage facilities

Accepted Answer

Holding costs include the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.

Question 6

Firms keep supplies of inventory for which of the following reasons?
A)To maintain dependence of operations
B)To provide a feeling of security for the workforce
C)To meet variation in product demand
D)To hedge against wage increases
E)In case the supplier changes the design

Accepted Answer

All firms keep a supply of inventory for the following reasons:1.To maintain independence of operations.2.To meet variation in product demand.3.To allow flexibility in production scheduling.4.To provide a safeguard for variation in raw material delivery time.5.To take advantage of economic purchase order size.

Question 7

The costs associated with reduced inventory results in lower profits.

Accepted Answer

Savings from reduced inventory results in increased profit.

Question 8

Savings from reduced inventory results in increased profit.

Accepted Answer

Savings from reduced inventory results in increased profit.

Question 9

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

Accepted Answer

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

Question 10

The average cost of inventory in the United States is 20 to 25 percent of its value.

Accepted Answer

The average cost of inventory in the United States is 30 to 35 percent of its value.

Question 11

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between inventory costs and the cost of stock-outs.

Accepted Answer

Logistics managers have to perform a daily, delicate balancing act, balancing:
• Transportation costs against fulfillment speed
• Inventory costs against the cost of stock-outs
• Customer satisfaction against cost to serve
• New capabilities against profitability

Question 12

When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time?
A)Normal variation in shipping time
B)A shortage of material at the vendor's plant causing backlogs
C)An unexpected strike at the vendor's plant
D)A lost order
E)Redundant ordering systems

Accepted Answer

When material is ordered from a vendor, delays can occur for a variety of reasons: a normal variation in shipping time, a shortage of material at the vendor's plant causing backlogs, an unexpected strike at the vendor's plant or at one of the shipping companies, a lost order, or a shipment of incorrect or defective material.

Question 13

Which of the following is not one of the categories of manufacturing inventory?
A)Raw materials
B)Finished products
C)Component parts
D)Just-in-time
E)Supplies

Accepted Answer

Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies, and work-in-process.

Question 14

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed.

Accepted Answer

Logistics managers have to perform a daily, delicate balancing act, balancing:
• Transportation costs against fulfillment speed
• Inventory costs against the cost of stock-outs
• Customer satisfaction against cost to serve
• New capabilities against profitability

Question 15

Which of the following is not a reason to carry inventory?
A)To provide a safeguard for variation in raw material delivery time
B)To take advantage of economic purchase-order size
C)To maintain independence of operations
D)To meet variation in product demand
E)To keep the stock out of the hands of competitors

Accepted Answer

All firms keep a supply of inventory for the following reasons:1.To maintain independence of operations.2.To meet variation in product demand.3.To allow flexibility in production scheduling.4.To provide a safeguard for variation in raw material delivery time.5.To take advantage of economic purchase order size.

Question 16

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

Accepted Answer

Step 1.Sort the prices from lowest to highest and then, beginning with the lowest price, calculate the economic order quantity for each price level until a feasible economic order quantity is found.By feasible, we mean that the price is in the correct corresponding range.Step 2.If the first feasible economic order quantity is for the lowest price, this quantity is best and you are finished.Otherwise, calculate the total cost for the first feasible economic order quantity (you did these from lowest to highest price) and also calculate the total cost at each price break lower than the price associated with the first feasible economic order quantity.This is the lowest order quantity at which you can take advantage of the price break.The optimal Q is the one with the lowest cost.

Question 17

Which of the following is one of the categories of manufacturing inventory?
A)Economic order inventory
B)Work-in-process
C)Quality units
D)JIT inventory
E)Reorder point

Accepted Answer

Manufacturing inventory is typically classified into raw materials, finished products, component parts, supplies, and work-in-process.

Question 18

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

Accepted Answer

Logistics managers have to perform a daily, delicate balancing act, balancing:
• Transportation costs against fulfillment speed
• Inventory costs against the cost of stock-outs
• Customer satisfaction against cost to serve
• New capabilities against profitability

Question 19

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

Accepted Answer

What accounts for the emergence of the direct-to-store model? Global sourcing and the upstream migration of value-added logistics services are certainly primary drivers.

Question 20

Which of the following is usually included as an inventory holding cost?
A)Order placing
B)Breakage
C)Typing up an order
D)Quantity discounts
E)Annualized cost of materials

Accepted Answer

Holding costs include the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.

Quiz 20: Inventory Management

One of the drivers of the direct-to-store (direct distribution) approach is the increase in global sourcing.

In a price-break model of lot sizing, the lowest cost quantity is always feasible.

When developing inventory cost models, which of the following is not included as a costs to place an order?

One of the drivers of the direct-to-store (direct distribution) approach is the decrease in trucking industry regulation.

Which of the following is not included as an inventory holding cost?

Firms keep supplies of inventory for which of the following reasons?

The costs associated with reduced inventory results in lower profits.

Savings from reduced inventory results in increased profit.

You should visualize inventory as stacks of money sitting on forklifts, on shelves, and in trucks and planes while in transit.

The average cost of inventory in the United States is 20 to 25 percent of its value.

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between inventory costs and the cost of stock-outs.

When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time?

Which of the following is not one of the categories of manufacturing inventory?

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between transportation costs and fulfillment speed.

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

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price and to check to see whether the lowest cost quantity is feasible.

Which of the following is one of the categories of manufacturing inventory?

One of the daily, delicate balancing acts that logistics managers have to perform involves the trade-off between customer satisfaction and cost to serve.

One of the drivers of the direct-to-store (direct distribution) approach is the upstream migration of value-added logistics services.

Which of the following is usually included as an inventory holding cost?