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Exam 13: Inventory Management

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Question 51

Multiple Choice

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In a single-period model, if shortage and excess costs are equal, then the optimum service level is:

A) 0
B) .33
C) .50
D) .67
E) none of these

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

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Question 52

Multiple Choice

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Lead time is exactly 20 days long.Daily demand is normally distributed with a mean of 10 gallons per day and a standard deviation of 2 gallons.What is the standard deviation of demand during lead time?

A) 20 x 2
B) 20 x 10
C) 2 times the square root of 20
D) 2 times the square root of 10
E) none of the above

F) A) and B)
G) A) and C)

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Question 53

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A firm stocks a seasonal item that it buys for $22/unit and sells for $29 unit.During the season, daily demand can be described using a Poisson distribution with a mean of 2.4.Because of the nature of the item, units remaining at the close of business each day must be removed at a cost of $2 each.What is the optimum stocking level, and what is the effective service level?

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

The inventory value of the supply chain exceeds the inventory value of the organization's work in process inventory.

Compared to the EOQ, the maximum inventory would be approximately:

Decoupling operations applies to the railroad industry.

All stock outs must be avoided.

If she were to order 80 pounds of pepperoni at a time, what would be the total daily costs, including the cost of the pepperoni?

Which of the following is least likely to be included in order costs?

For the economic order quantity, what are average weekly ordering costs?

DVD recorders would be an example of independent demand items.

In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill.

If unsold copies can be returned for half credit and copies sell for $4.25 each, find the optimal stocking level.

An operations strategy for inventory management should work towards:

In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will:

If average demand for an item is 20 units per day, safety stock is 50 units, and lead time is four days, the ROP will be:

At what point should resin be reordered?

A bakery's use of corn sweetener is normally distributed with a mean of 80 gallons per day and a standard deviation of four gallons per day.Lead time for delivery of the corn sweetener is normal with a mean of six days and a standard deviation of two days.If the manager wants a service level of 99 percent, what reorder point should be used?