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Exam 13: Inventory Management

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Question 21

Multiple Choice

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In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately:

A) 11.
B) 20.
C) 24.
D) 28.
E) 375.

F) B) and E)
G) B) and C)

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Question 22

Multiple Choice

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In the basic EOQ model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1 per unit per year will result in an EOQ of:

A) 20.
B) square root of 200.
C) 200.
D) 400.
E) 600.

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

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Question 23

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?

The single-period model can be very helpful in determining when to order.

Suppose that usage of cooking oil at Harry's Fish Fry is normally distributed with an average of 15 gallons/day and a standard deviation of two gallons/day. Harry has just fired the manager and taken over operating the restaurant himself. Harry has asked you to help him decide how to reorder cooking oil in order to achieve a service level which is seven times the risk of stockout (7/8). Lead time is eight days. Assume that cooking oil can be ordered as needed.

Given the following information: Order quantity = 300; $\sigma _ { d L T }$ = 20 units; desired lead time service level = .86. Find: (A) the expected number of units short per cycle (B) the annual service level

Discrete stocking levels are used when an organization does not want visibility of inventory levels.

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

The introduction of quantity discounts will cause the optimum order quantity to be:

If average demand for an inventory item is 200 units per day, lead time is three days, and safety stock is 100 units, the reorder point is:

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?

Because price is not a factor in the EOQ formula, quantity discounts will not affect EOQ calculations.

Which of the following is not true for the economic production quantity model?

It is critical that the exact quantity calculated in the EOQ model be ordered.

Which one of these would not be a factor in determining the reorder point?

An inventory buffer adds value and lowers cost in all supply chains.

The management of supply chain inventories focuses on:

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

The Corner Newsstand has demand for a certain weekly magazine that can be approximated by a Poisson distribution with a mean of 9.0. Magazines are purchased for $1.50. If unsold copies must be destroyed and copies sell for $4.00 each, find the optimum stocking level.

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 the daily total inventory costs, EXCLUDING the cost of the resin?