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Exam 18: Inventory Management

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Question 81

True/False

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The inventory position for each item is the quantity on hand plus the quantity on order minus the quantity backordered.

A) True
B) False

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Question 82

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Which one of the following is implied by a " lead time " service level of 95 percent?

A) Approximately 95 percent of demand during lead time will be satisfied.
B) The probability is 95 percent that demand during lead time will not exhaust the inventory.
C) The probability is 95 percent that demand during lead time will exactly equal the amount on hand at the beginning of lead time.
D) The probability is 95 percent that demand during lead time will not exceed the amount on hand at the beginning of lead time.

E) A) and D)
F) None of the above

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Question 83

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The Operations Manager for Shadyside Savings & Loan orders cash from her home office for her very popular "BIG BUCKS" automated teller machine,which only dispenses $100 bills.She estimates that this machine dispenses an average of 12,500 bills per month,and that holding a bill in inventory costs 10 percent of its value annually.She knows that each order for these bills costs $300 for clerical and armoured car delivery costs,and that order lead time is six days. If she were to order 6,000 bills at a time,what would be the average monthly total costs,EXCLUDING the value of the bills?

The purpose of "cycle counting" is to:

The situation when inventories are held at more than one location in a company's outbound distribution supply chain is referred to as:

In the fixed order interval model,also known as the order up to level model,the order size is the same for each cycle.

In the single period model,if excess cost is double shortage cost,the approximate stock-out risk,assuming an optimum service level,is:

A two-bin system for inventory control eliminates the need for perpetual inventory tracking.

Given the following data for a particular inventory item: For the economic order quantity,what is the length of an order cycle?

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. If he were to order 16 cases of Stein beer at a time,what would be the average inventory level?

The basic EOQ model assumes that the demand varies widely throughout the year.

The EOQ should be regarded as an approximate quantity rather than an exact quantity,so rounding off the calculated value is acceptable.

When excess cost is equal to shortage cost in the single period model,the optimum stocking level falls in the center of the demand distribution for the item.

Which inventory model is most appropriate if unused or unsold items cannot be carried over to subsequent periods?

In the EOQ with planned shortages,it is assumed there is no cost is associated with backorders.

In a two-bin inventory system,the amount contained in the second bin is equal to the:

Variability in demand and/or lead time can be compensated for by safety stock.