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Exam 20: Inventory Management

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Question 41

Multiple Choice

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Which of the following values for z should we use in as a safety stock calculation if we want a service probability of 98 percent?

A) 1.64
B) 1.96
C) 2.05
D) 2.30
E) None of these

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Question 42

Multiple Choice

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If it takes a supplier 2 days to deliver an order once it has been placed and the daily demand for 3 days has been 120, 124, and 125, which of the following is the standard deviation of usage during lead time?

A) About 2.16
B) About 3.06
C) About 4.66
D) About 5.34
E) About 9.30

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Question 43

Multiple Choice

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When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time?

If the cost to change from producing one product to producing another were zero, the lot size would be very small.

One of the basic purposes of inventory analysis in manufacturing and stock keeping services is to determine the level of quality to specify.

A company wants to determine its reorder point (R) .Demand is variable and the company wants to build a safety stock into R.If the average daily demand is 12, the lead time is 5 days, the desired z value is 1.96, and the standard deviation of usage during lead time is 3, which of the following is the desired value of R?

Price-break models deal with the fact that the selling price of an item generally increases as the order size increases.

Which of the following is not an assumption of the basic fixed-order-quantity inventory model?

If it takes a supplier 25 days to deliver an order once it has been placed and the standard deviation of daily demand is 20, which of the following is the standard deviation of usage during lead time?

Shortage costs are precise and easy to measure.

Inventory is defined as the stock of any item or resource used in an organization.

If annual demand is 8,000 units, the ordering cost is $20 per order, and the holding cost is $12.50 per unit per year, what is the optimal order quantity using the fixed-order-quantity inventory model? _____________________________________.

In a price-break model of lot sizing, to find the lowest-cost order quantity, it is sometimes necessary to calculate the economic order quantity for each possible price.

The "sawtooth effect" is named after the jagged shape of the graph of inventory levels over time.

In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment.

Savings from reduced inventory results in increased profit.

Fixed-order-quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

Firms keep supplies of inventory for which of the following reasons?

Assuming no safety stock, what is the reorder point (R) given an average daily demand of 50 units, a lead time of 10 days, and 625 units on hand?

Fixed-order-quantity inventory systems determine the reorder point, R, and the order quantity, Q, values.