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Exam 12: Inventory Management

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Question 61

True/False

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ROP models assume that demand during lead time is composed of a series of dependent daily demands.

A) True
B) False

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Question 62

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In the basic EOQ model, if D = 60 per month, S = $12, and H = $10 per unit per month, EOQ is

A) 10.
B) 12.
C) 24.
D) 72.
E) 144.

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

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Question 63

Multiple Choice

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If no variations in demand or lead time exist, the ROP will equal

In the EOQ formula, holding costs under 10 percent are expressed as percentages, above 10 percent are expressed as annual unit costs.

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 the order size was 1,000 kilograms of resin, what would be theaverage daily total inventory costs, EXCLUDING the cost of the resin?

Daily usage is exactly 60 gallons per day. Lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days. What is the standard deviation of demand during lead time?

A manufacturer is contemplating a switch from buying to producing a certain item. Setup cost would be the same as ordering cost. The production rate would be about double the usage rate. Compared to the EOQ, the economic production quantity would be approximately

Monitoring inventory turns over time can be used as a measure of performance.

_____is that the average amount of inventory in a system is equal to the product of the average demand rate and the average time a unit is in the system.

A risk avoider would want ______ safety stock.

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. If he were to order 16 cases of Stein beer at a time, what would be theaverage daily total inventory costs, EXCLUDING the cost of the beer?

A retail store that carries twice as much inventory as its competitor will provide twice the customer service level.

Which of the following is typically the largest of all inventory costs?

In the single-period model, if excess cost is double the shortage cost, the approximate stockout risk, assuming an optimum service level, is ___ percent.

Weekly demand for a particular item averages 30 units, with a standard deviation of 4. This item is managed with a fixed-order-interval model. The order interval is three weeks, and this item has a certain lead time of one week. The desired service level is 97.5 percent. Assume that it is now time to place another order, and there are 43 units on hand. How many units should be ordered?

A fill rate is the percentage of _____ filled by stock on hand.

A nonlinear cost related to order size is the cost of

The average inventory level is inversely related to order size.

In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve.

EOQ inventory models are basically concerned with the timing of orders.