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Exam 18: Inventory Management

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Question 41

Multiple Choice

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In the basic EOQ model,if annual demand is 50,holding cost is $2,and ordering cost is $15,the EOQ (rounded to the next whole number) is:

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

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

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Question 42

Multiple Choice

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The need for safety stock can be reduced by an inventory planning strategy which:

A) increases lead time.
B) increases lead time variability.
C) increases lot sizes.
D) decreases ordering costs.
E) decreases lead time variability.

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

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Question 43

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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,what is the optimum stocking level and its effective service level?

In the Periodic Review Model inventory position is reviewed periodically,for example every three days.

Effective use of inventories would be implied from which of the following?

With fixed-interval ordering,perpetual tracking of inventory isn't required.

A restaurant prepares Peking Duck daily at a cost of $18 per duck.Each duck generates revenue of $47 if sold.Demand for Peking Duck can be described by a Poisson distribution with a mean of 4.2 ducks per day.Unsold ducks at the end of each day are converted to duck soup at an additional cost of $5 over and above the resulting value as soup.How many ducks should be prepared each day? What will be the effective service level?

The two main concerns of inventory management relate to the costs of ordering and holding inventories and the level of customer service (item availability).

The average inventory level and the number of orders per year are inversely related; as one increases,the other decreases.

Given the same demand,setup/ordering costs,and holding costs,the EPQ will be:

A lower inventory turnover ratio indicates more efficient use of inventories.

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

Which of the following would not generally be considered as one of the functions for holding inventories?

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?

In the EOQ model with planned shortages,if annual demand is 500,holding cost is $200,ordering cost is $15,and back-order cost is $400,the quantity back-ordered per replenishment cycle,rounded to the next whole number,is:

Cross-docking or eliminating distribution centres (DCs)reduces the need for work-in-process inventory.

In the EOQ model with planned shortages,if annual demand is 500,holding cost is $200,ordering cost is $15,and back-order cost is $400,EOQ (rounded to the next whole number) is:

Based on the EOQ model,an appropriate strategy for managing inventory when there has been a dramatic increase in holding costs but ordering costs have been significantly reduced would be:

Which one of the following is not a determinant of the reorder point (ROP) ?

Which is not considered a holding cost?