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Exam 12: Inventory Management

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Question 21

Multiple Choice

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Dairy items, fresh fruit, and newspapers are items that

A) do not require safety stocks.
B) cannot be ordered in large quantities.
C) are subject to deterioration and spoilage.
D) require that prices be lowered every two days.
E) have minimal holding costs.

F) D) and E)
G) A) and B)

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Question 22

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A single-period model would be used mainly by organizations going out of business.

A) True
B) False

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Question 23

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Which one of the following is implied by an annual service level of 95 percent?

One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.

When to order can be calculated by the ROP and expressed as a quantity.

The materials manager for a billiard ball maker must periodically place orders for resin, one of the raw materials used in producing billiard balls. She knows that manufacturing uses resin at a rate of 50 kilograms each day, and that it costs $.04 per day to carry a kilogram of resin in inventory. She also knows that the order costs for resin are $100 per order, and that the lead time for delivery is four days. If order size was 1,000 kilograms of resin, what would be the length of an order cycle?

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 per six-pack (each case of Stein beer contains four six-packs) . Orders arrive three days from the time they are placed. Daily holding costs are equal to 5 percent of the cost of the beer. What is the economic order quantity for Stein beer?

Which of these products would be most apt to involve the use of a single-period model?

Interest, insurance, and opportunity costs are all associated with holding costs.

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probably be classified as

The perpetual inventory system is also known as what type of review system?

In a supermarket, a vendor's restocking the shelves every Monday morning is an example of

In a single-period model, if shortage cost is four times excess cost, then the optimum service level is _____ percent.

Reorder point models are primarily used for dependent-demand items.

To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: when to order and how much to order.

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. At what point should she reorder pepperoni?

Safety stock is held because we anticipate future demand.

Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 20 pounds of pepperoni each day in preparing pizzas. Order costs for pepperoni are $10.00 per order, and carrying costs are 4 cents per pound per day. Lead time for each order is three days, and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time, what would be the average inventory level?

DVD recorders would be an example of independent-demand items.

The fixed-order-interval model requires a continuous monitoring of inventory levels.