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Exam 18: Inventory Management

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Question 71

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The basic EOQ model is most relevant for which one of the following?

A) Ordering items with dependent demand.
B) Determination of safety stock.
C) Ordering perishable items.
D) Determining fixed interval order quantities.
E) Determining fixed order quantities.

F) C) and D)
G) D) and E)

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Question 72

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The service level for inventory planning is associated with the risk of a stock-out.

A) True
B) False

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Question 73

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Laser scanning of universal product codes at retail checkout counters does not provide which of the following advantages?

All of the following are possible reasons for using the fixed order interval model except:

Which of the following is not one of the assumptions of the basic EOQ model?

In the quantity discount model,in order for the EOQ of the lowest curve to be optimum,it must:

The reorder point (ROP)must be recomputed before each order (i.e.,once every order cycle).

In the EOQ with quantity discounts model,a graph of the total cost curves will have the same EOQ for each curve.

Which of the following is not included in ordering cost?

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day.Order costs are $20.00 per order,and Stein beer costs $8.00 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 five percent of the cost of a Stein beer case. What is the economic order quantity for Stein beer?

Given the following data for a particular inventory item: For the economic order quantity,what is the average inventory level?

Demand that is unknown and has to be forecasted is known as independent demand.

In a single period model,if shortage cost is four times excess cost,then the optimum service level is:

Which of the following is not an assumption of the basic EOQ model?

A company can produce a part it uses in an assembly operation at the rate of 50 an hour.The company operates eight hours a day,300 days a year.Daily usage of the part is 300 parts.The company uses the part every day.The run size is 6,000 parts.The annual holding cost is $2 per unit,and setup cost is $100. (i)How many runs per year will there be? (ii)While production is occurring,how many parts per day are being added to inventory? (iii)Assuming that production begins when there are no parts on hand,what is the maximum number of parts in inventory? (iv)The machine is dedicated to this product.Every so often,preventive maintenance,which requires six working days,must be performed on it.Does this interrupt production cycles,or is there enough time between cycles to perform the maintenance? Explain.

The single period model can be very helpful in determining how much to order.

In the EOQ model with planned shortages,if annual demand is 100,holding cost is $400,ordering cost is $20,and back-order cost is $200,the quantity back-ordered per replenishment cycle,rounded to the next whole number,is:

Allocation methods are used by distribution centres (DCs)when they have excess capacity relative to the orders received by the retailers they serve.

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

The total cost curve for inventory costs is relatively flat near the EOQ.