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Exam 13: Inventory Management

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Question 61

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If unsold copies must be destroyed and copies sell for $4.00 each, find the optimum stocking level.

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Ce = $1.50 Cs = $4.00 - 1.50 =...

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Question 62

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

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B) False

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Question 63

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If, in a single-period inventory situation, the probabilities of demand being 1, 2, 3, or 4 units are .3, .3, .2, and .2, respectively.If two units are stocked, what is the probability of selling both of them?

Suppose that you are the manager of a production department that uses 400 boxes of rivets per year.The supplier quotes you a price of $8.50 per box for an order size of 199 boxes or less, a price of $8.00 per box for orders of 200 to 999 boxes, and a price of $7.50 per box for an order of 1,000 or more boxes.You assign a holding cost of 20 percent of the price to this inventory.What order quantity would you use if the objective is to minimize total annual costs of holding, purchasing, and ordering? Assume ordering cost is $80/order.

The fixed order interval model would be most likely to be used for this situation:

If the order size was 1,000 kilograms of resin, what would be the daily total inventory costs, EXCLUDING the cost of the resin?

Solving quality problems can lead to lower inventory levels.

The injection molding department of a company uses 40 pounds of a powder a day.Inventory is reordered when the amount on hand is 240 pounds.Lead time averages five days.It is normally distributed and has a standard deviation of two days.What is the probability of a stockout during lead time?

Daily usage is exactly 60 gallons per day.Lead time is normally distributed with a mean of 10 days and a standard deviation of 2 days.What is the standard deviation of demand during lead time?

Which of these products would be most apt to involve the use of a single-period model?

A manager has just received a revised price schedule from a vendor.What order quantity should the manager use in order to minimize total costs? Annual Demand is 120 units, ordering cost is $8, and annual carrying cost is $1 per unit.

In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve.

The cycle time represents the time between reorder point and receipt of order.

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

In the basic EOQ model, if D = 60 per month, S = $12, and H = $10 per unit per month, EOQ is:

An operations strategy which recognizes high carrying costs and reduces ordering costs will result in:

In a supermarket, a vendor's restocking the shelves every Monday morning is an example of:

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?

If average demand for an inventory item is 200 units per day, lead time is three days, and safety stock is 100 units, the reorder point is:

Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.