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Exam 13: Inventory Management

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Question 21

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Continuous inventory systems are primarily intended for lower cost items because they are easier to use requiring fewer resources.

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Question 22

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Continuous inventory systems are also referred to as a fixed-order-quantity system.

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Question 23

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The periodic inventory system is often preferred for high quantity,low value items.

The number of orders can be calculated by dividing the daily demand rate,d,by the order quantity,Q.

In ABC analysis,each class of inventory requires different levels of inventory monitoring and control.

Class A items in the ABC classification system require less monitoring and control than Class C items.

Receiving,handling and shipping costs are examples of

Carrying costs are more difficult to determine than ordering or shortage costs.

A restaurant currently uses 62,500 boxes of napkins each year at a constant daily rate.The cost to order napkins is $200.00 per order and the annual carrying cost for one box of napkins is $1.00.If the restaurant orders the economic order quantity then the average inventory for napkins is

___________ demand items are used in the process of producing a final product.

Briefly compare and contrast a continuous inventory system to a periodic inventory system listing the advantages and disadvantages of each.

A continuous inventory system is also known as a

Inventory management is concerned with how much to order and when to order.

A service level of 95% means there is a 0.95 probability

Product deterioration,spoilage,breakage,and obsolescence are examples of shortage costs.

Annual demand for a product is 40,000 units.The product is used at a constant rate over the 365 days the company is open every year.The annual holding cost for the product is estimated to be $2.50 per unit and the cost of placing each order is $125.00.If the company orders according to the economic order quantity (EOQ) formula then its optimal order size for this product would be

The EOQ model determines the optimal order size that minimizes the sum of carrying cost and shortage costs.

With the economic order quantity (EOQ)model ,the number of orders increases as the order size decreases.

Finished product is an example of a dependent demand item.

Dependent demand items are typically products for use by the final customer.