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Exam 5: Inventory Management

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Question 41

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The goal of ABC analysis is to

A) determine the profitability of items.
B) estimate average volume per dollar value.
C) estimate dollar value per pound.
D) to identify the A items for better inventory control.

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Question 42

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As the setup cost (S)increases,the economic order quantity (EOQ)decreases.

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Question 43

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Inventory used to increase predictable,uneven rates of demand or supply,which businesses often face,is called anticipation inventory.

Table 5.4 A company operating under a continuous review system has an average demand of 50 units per week for the item it produces.The standard deviation in weekly demand is 20 units.The lead time for the item is 6 weeks,and it costs the company $30 to process each order.The holding cost for each unit is $10 per year.The company operates 52 weeks per year.You will need to refer to a normal table to answer the question(s) . -Use the information in Table 5.4.What is the desired safety stock level if the company has a policy of maintaining a 90 percent cycle-service level?

Which of the following statements regarding a continuous review (Q) system for inventory control is FALSE?

________ is the lot size that minimizes total annual inventory holding and ordering costs.

The item fill rate measures how quickly orders arrive from suppliers.

One of the secondary levers for reducing pipeline inventory is to

Table 5.2 Consider the following data for an independent demand item maintained by Vicki Crittenden,the proprietor of a local auto repair shop: Weekly demand = 50 units Ordering cost = $8/order Holding cost = $4/order Weeks in a year = 50 -Use the information in Table 5.2.If Crittenden uses the EOQ model,how frequently must she place orders for this item?

Which one of the following statements about anticipation inventory is TRUE?

Table 5.6 Peterson Enterprises uses a continuous review inventory control system.The firm operates 50 weeks per year and has the following characteristics for an item: Demand = 50,000 units/year Ordering cost = $35/order Holding cost = $2/unit/year Lead time = 3 weeks Standard deviation in weekly demand = 125 units You will need to refer to a normal table to answer the question(s) . -Use the information in Table 5.6.If Peterson wishes to provide a 90 percent cycle-service level,what is the reorder point?

Which one of the following statements is best?

Which one of the following statements concerning a continuous review system is best?

For a given level of annual demand (D),as lot sizes (Q)increase there is a trade off between higher holding costs and lower ordering or setup costs.

Reducing the lead times associated with purchasing or producing items has no impact on the level of safety stock inventory.

Service level is the desired probability of not running out of stock in any one order cycle.

For a continuous review (Q)inventory system,with uncertain demand the time between orders (TBO)is the same for each cycle.

Jan Tuttle is the inventory manager of an art supply store.She uses a periodic review system for all oil paints.The number of periods between orders (P) for red #69 is 15 workdays.(The store operates 50 weeks/year,5 workdays/week. ) Additional information concerning red #69 follows. Demand = 30 units/workday Standard deviation of daily demand = 4 units/workday Lead time = 7 workdays Desired cycle-service level = 85% A normal table is appended to this exam.What is the target inventory level T for red #69?

Table 5.5 You are the operations manager of a firm that uses the continuous review inventory control system.Suppose the firm operates 52 weeks a year and has the following characteristics for its primary item: Demand = 25,000 units/year Ordering cost = $30/order Holding cost = $8/unit/year Lead time = 2 weeks Standard deviation in weekly demand = 100 units You will need to refer to a normal table to answer the question(s) . -Use the information in Table 5.5.What is the economic order quantity for this item?

Table 5.9 You will need to refer to a normal table to answer the question(s) . -Use the information in Table 5.9.Design a periodic review system with P = 4 weeks.Assume demand during lead time plus review period to be normally distributed.What target inventory will provide the desired cycle-service level of 85 percent?