Question 1

Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.

Accepted Answer

The characteristics management considers...

Question 2

Which of the following is not a component of holding cost?

Accepted Answer

A)  Taxes
B)  Insurance
C)  Material handling
D)  Order processing

Question 3

Which one of the following statements concerning the economic order quantity (EOQ)  model is not true when the unit holding cost increases?

Accepted Answer

A)  the economic order quantity will decrease
B)  the number of orders per year will decrease
C)  total ordering cost will increase
D)  average inventory will decrease

Question 4

Which one of the following statements is true?

Accepted Answer

A)  Inventory is any physical asset held for future use or sale.
B)  When using ABC analysis, "C" items should be reviewed most frequently.
C)  Dependent demand is directly related to the demand of other stock keeping units and can be calculated without needing to be forecast.
D)  Stockouts occur in a Fixed Quantity System (FQS)  whenever the lead-time demand exceeds the replenishment level (M) .

Question 5

The owner of a garden supply store was wondering if they could manage their inventory better.She decided to develop an ABC classification system to help manage the inventory.The company's inventory consists of the following items:
 
a.Compute the total dollar value of each of the ten inventory items.What is the total value of all the inventory items?
b.Which items should be declared "A" items? What percentage of total inventory value does your "A" group represent? What percentage of the total number of inventory items does your "A" group represent?
c.Which items should be declared "B" items? What percentage of total inventory value does your "B" group represent? What percentage of the total number of inventory items does your "B" group represent?
d.Which items should be declared "C" items? What percentage of total inventory value does your "C" group represent? What percentage of the total number of inventory items does your "C" group represent?

Accepted Answer

The answer of The owner of a garden supply store...

Question 6

Explain the difference between a fixed quantity system and a fixed period system.

Accepted Answer

In a fixed quantity system (FQS), the or...

Question 7

Marketing an operations generally prefer high inventory levels while finance would prefer small inventories.

Accepted Answer

A) True 
 B)False  True

Question 8

Safety stock inventory is an additional amount of inventory kept over and above the average amount required to meet demand during the lead time.

Accepted Answer

A) True 
 B)False

Question 9

In a fixed quantity inventory system with certain demand, the reorder point is chosen to be the average demand during the lead time.

Accepted Answer

A) True 
 B)False  True

Question 10

When a customer is unwilling to wait for an item that is not in stock and purchases the item elsewhere, a backorder has occurred.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a key assumption underlining the classic economic order quantity (EOQ)  model?

Accepted Answer

A)  The entire order quantity arrives in the inventory at one time
B)  There are only two types of relevant costs: order/setup and inventory-holding
C)  Demand is assumed to be stochastic
D)  Stockouts are not allowed

Question 12

Demand that varies over time is called ____.

Accepted Answer

A)  Static
B)  Dynamic
C)  Stochastic
D)  Deterministic

Question 13

In a single-period inventory situation, the only inventory decision is when to trigger an order.

Accepted Answer

A) True 
 B)False

Question 14

Explain the different types of inventories maintained throughout a value chain.

Accepted Answer

Raw materials, component parts, subassem...

Question 15

A bookstore must decide on how many calendars to order for the next year.Each calendar costs $2 and is sold for $4.50.After January 1, any unsold calendars are returned to the publisher for a refund of $0.75 each.The distribution of demand is uniform between 100 and 300.How many calendars should the bookstore order?

Accepted Answer

c_u = 4.50 - 2 = 2.5...

Question 16

Which one of the following statements is true?

Accepted Answer

A)  The level of safety stock maintained decreases when the desired cycle-service level increases.
B)  The level of safety stock maintained decreases when the standard deviation of demand during lead time increases.
C)  In a fixed period inventory system, the value of Q is kept the same from one cycle to another.
D)  When demand is uncertain and no safety stock is maintained, stock outs will occur during approximately 50 percent of the cycles.

Question 17

Costs associated with inspecting, unpacking and putting into storage incoming inventory are components of ____ cost.

Accepted Answer

A)  Ordering or setup
B)  Holding
C)  Shortage
D)  Unit

Question 18

What are the four categories of inventory costs?

Accepted Answer

1.	Ordering costs or setup costs are incurred as a result of the work involved in placing orders with suppliers or configuring tools, equipment, and machines within a factory to produce an item. Order and setup costs do not depend on the number of items purchased or manufactured, but rather on the number of orders that are placed.
2.	Inventory-holding or inventory-carrying costs are the expenses associated with carrying inventory. Holding costs are typically defined as a percentage of the dollar value of inventory per unit of time (generally one year). They include costs associated with maintaining storage facilities, such as gas and electricity, taxes, insurance, and labor and equipment necessary to handle, move, and retrieve an SKU.
3.	Shortage or stockout costs are costs associated with a SKU being unavailable when needed to meet demand. These costs can reflect backorders, lost sales, or service interruptions for external customers, or costs associated with interruptions to manufacturing and assembly lines for internal customers.
4.	Unit cost is the price paid for purchased goods or the internal cost of producing them. In most situations, the units cost is a "sunk cost" because the total purchase cost is not affected by the order quantity.

Question 19

Because of demanding customers, organizations must always maintain a 100% service level.

Accepted Answer

A) True 
 B)False

Question 20

Work in process inventory is completed products ready for distribution or sale to customers.

Accepted Answer

A) True 
 B)False

Exam 12: Managing Inventories

Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.

Correct Answer
verified
The characteristics management considers...
View Answer

Which of the following is not a component of holding cost?

Correct Answer
verified

Which one of the following statements concerning the economic order quantity (EOQ) model is not true when the unit holding cost increases?

Correct Answer
verified

Which one of the following statements is true?

Correct Answer
verified

Correct Answer
verified

Explain the difference between a fixed quantity system and a fixed period system.

Correct Answer
verified
In a fixed quantity system (FQS), the or...
View Answer

Marketing an operations generally prefer high inventory levels while finance would prefer small inventories.

Correct Answer
verified
True

Safety stock inventory is an additional amount of inventory kept over and above the average amount required to meet demand during the lead time.

Correct Answer
verified

In a fixed quantity inventory system with certain demand, the reorder point is chosen to be the average demand during the lead time.

Correct Answer
verified
True

When a customer is unwilling to wait for an item that is not in stock and purchases the item elsewhere, a backorder has occurred.

Correct Answer
verified

Which of the following is not a key assumption underlining the classic economic order quantity (EOQ) model?

Correct Answer
verified

Demand that varies over time is called ____.

Correct Answer
verified

In a single-period inventory situation, the only inventory decision is when to trigger an order.

Correct Answer
verified

Explain the different types of inventories maintained throughout a value chain.

Correct Answer
verified
Raw materials, component parts, subassem...
View Answer

Correct Answer
verified
c_u = 4.50 - 2 = 2.5...
View Answer

Which one of the following statements is true?

Correct Answer
verified

Costs associated with inspecting, unpacking and putting into storage incoming inventory are components of ____ cost.

Correct Answer
verified

What are the four categories of inventory costs?

Because of demanding customers, organizations must always maintain a 100% service level.

Correct Answer
verified

Work in process inventory is completed products ready for distribution or sale to customers.

Correct Answer
verified

Exam 12: Managing Inventories

Summarize the characteristics of the inventory environment that management considers when developing an inventory management system.

Correct AnswerverifiedThe characteristics management considers...View AnswerShow Answer

Which of the following is not a component of holding cost?

Correct AnswerverifiedShow Answer

Which one of the following statements concerning the economic order quantity (EOQ) model is not true when the unit holding cost increases?

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain the difference between a fixed quantity system and a fixed period system.

Correct AnswerverifiedIn a fixed quantity system (FQS), the or...View AnswerShow Answer

Marketing an operations generally prefer high inventory levels while finance would prefer small inventories.

Correct AnswerverifiedTrue

Safety stock inventory is an additional amount of inventory kept over and above the average amount required to meet demand during the lead time.

Correct AnswerverifiedShow Answer

In a fixed quantity inventory system with certain demand, the reorder point is chosen to be the average demand during the lead time.

Correct AnswerverifiedTrue

When a customer is unwilling to wait for an item that is not in stock and purchases the item elsewhere, a backorder has occurred.

Correct AnswerverifiedShow Answer

Which of the following is not a key assumption underlining the classic economic order quantity (EOQ) model?

Correct AnswerverifiedShow Answer

Demand that varies over time is called ____.

Correct AnswerverifiedShow Answer

In a single-period inventory situation, the only inventory decision is when to trigger an order.

Correct AnswerverifiedShow Answer

Explain the different types of inventories maintained throughout a value chain.

Correct AnswerverifiedRaw materials, component parts, subassem...View AnswerShow Answer

Correct Answerverifiedcu = 4.50 - 2 = 2.5...View AnswerShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Costs associated with inspecting, unpacking and putting into storage incoming inventory are components of ____ cost.

Correct AnswerverifiedShow Answer

What are the four categories of inventory costs?

Because of demanding customers, organizations must always maintain a 100% service level.

Correct AnswerverifiedShow Answer

Work in process inventory is completed products ready for distribution or sale to customers.

Correct AnswerverifiedShow Answer

Correct Answer
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The characteristics management considers...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In a fixed quantity system (FQS), the or...
View Answer

Correct Answer
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True

Correct Answer
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Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Raw materials, component parts, subassem...
View Answer

Correct Answer
verified
c_u = 4.50 - 2 = 2.5...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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