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INVENTORY MANAGEMENT

One use of inventory is

 to tightly link production and distribution processes.
 to provide a hedge against inflation.
 to tightly link a firm s production with its customer s demand.
 to ensure that item cost is maximized.

Monitoring the temperature of tomatoes during shipment would best be done using:

 GPS
 ROP
 RFID tags
 Bar codes.
 Universal Product Codes (UPC)

The goal of ABC analysis is to

 determine the profitability of items.
 to identify the A items for better inventory control.
 estimate average volume per dollar value.
 estimate dollar value per pound.

With the quantity-discount model, an order level might not be at a minimum point of a total cost curve.

 False
 True

Reorder point models are primarily used for independent demand items.

 True
 False

Which of the following inventory systems would be most appropriate in controlling many items ordered from the same vendor?

 Materials Requirements Planning System
 Fixed Time Period System
 Fixed Order Quantity System
 One Period Inventory Model Using Marginal Analysis

Space considerations are not included in any of the economic ordering models.

 True
 False

For a company that manufactures most of its products as standards, more inventory should be placed

 close to suppliers.
 equally distributed between the plants and warehouses.
 closer to the customer.
 within the plant as work-in-process.

Inventory record accuracy would be decreased by

 increasing stockroom accessibility.
 cycle counting.
 ABC analysis.
 reorder points.

A system that triggers ordering on a uniform time basis is called a

 fixed-quantity system.
 reorder point system.
 EOQ.
 fixed-period system.

If both the lead time and daily demand are constant (no variation), the ROP is equal to:

 Daily demand times lead time.
 Expected demand minus safety stock.
 Safety stock
 Expected demand plus safety stock.

Extra units that are held in inventory to reduce stockouts are called

 safety stock.
 demand variance.
 reorder point.
 just-in-time inventory.

If the production rate in an economic production lot size model is very much larger than the consumption rate, the results are practically the same for economic production lot size and EOQ.

 False
 True

What items do students typically buy on an ROP basis?

 wedding gifts
 bran muffins
 computer software
 textbooks
 gasoline for car

Most inventory models are made based on:

 Minimizing lead time
 Profit maximization
 Minimizing setup times
 Optimum influence on demand
 Cost minimization

Policies based on ABC analysis might include investing

 the most time and effort verifying the accuracy of records for B items.
 more in inventory security for C items.
 extra care in forecasting for C items.
 more in supplier development for A items.

The Basic EOQ model ignores:

 B and C items
 A items
 Ordering costs
 Purchasing costs
 Holding costs

Fixed-order quantity models are:

 Made up of a variable order size
 Time triggered
 Event triggered
 Fixed for a specified time period

ABC analysis divides an organizations on-hand inventory into three classes based upon

 annual dollar volume.
 annual demand.
 unit price.
 the number of units on hand.

Which of the following is NOT a type of inventory?

 MRP
 raw material
 finished goods
 work-in-process

In the basic Q model, if the lead time doubles, the EOQ will:

 decrease by half
 double
 increase, but not double
 none of the above
 remain the same

Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE?

 Uncertainty in leadtime may not exist.
 Quantity discounts can occur and taken into account in the total cost calculations.
 Annual holding cost, annual purchasing cost and annual delivery costs are the relevant costs in the
 Partial receipts are allowed.

The difference(s) between the basic EOQ model and the production order quantity model is (are) that

 the production order quantity model does not require the assumption of known, constant demand.
 there are no holding costs in the production order quantity model.
 A. the EOQ model does not require the assumption of known, constant lead time.
 the production order quantity model does not require the assumption of instantaneous delivery.

The two most important inventory-based questions answered by the typical inventory model are

 when to place an order and what is the cost of the order.
 how many of an item to order and what is the cost of this order.
 when to place an order and how many of an item to order.
 how many of an item to order and with whom the order should be placed.

A firm producing medical equipment to customer specifications is most likely using a

 make-to-order strategy.
 mass production strategy.
 assemble-to-order strategy.
 make-to-stock strategy.

Which one of the following statements is best?

 In a fixed interval system, the value of Q is kept the same from one cycle to another.
 A fixed interval system requires more safety stock than a ROP system.
 A fixed interval system lends itself more to quantity discounts than does a ROP system.
 A fixed interval system requires more administrative control and computer support than does a ROP sy

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

 safety stock
 amount in the first bin
 optimum stocking level
 EOQ
 ROP

In the basic fixed-order quantity model, if annual demand doubles, the effect on the Optimal Order Quantity (EOQ) is:

 it is about 70% of its previous amount
 it increases by about 40%
 decreases by a factor of 2
 it is half its previous amount
 it doubles