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Exam 18: Inventory Management

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Question 61

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The basic EOQ model ignores the purchasing cost.

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Question 62

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The rate of demand is an important factor in determining the ROP.

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Question 63

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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?

In the basic EOQ model, if annual demand is 50, carrying cost is $2, and ordering cost is $15, EOQ is approximately:

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 carrying a bill in inventory costs 10 percent of its value annually. She knows that each order for these bills costs $300 for clerical and armored car delivery costs, and that order lead time is six days. Assuming a 30-day month, if she were to order 6,000 bills at a time, what would be the length of an order cycle?

When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves:

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.

Interest, insurance, and opportunity costs are all associated with holding costs.

Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.

It is critical that the exact quantity calculated in the EOQ model be ordered.

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probably be classified as:

The manager of the Quick Stop Corner Convenience Store (which never closes) sells four cases of Stein beer each day. Order costs are $8.00 per order, and Stein beer costs $.80 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 5 percent of the cost of the beer. If he were to order 16 cases of Stein beer at a time, what would be the length of an order cycle?

The objective of inventory management is to minimize the cost of holding inventory.

Monitoring inventory turns over time can be used as a measure of performance.

A nonlinear cost related to order size is the cost of:

If no variations in demand or lead time exist, the ROP will equal:

A quantity discount will lower the reorder point.

Decoupling operations means to break the linkage between two sequential operations.

Lead time is exactly 20 days long. Daily demand is normally distributed with a mean of 10 gallons per day and a standard deviation of 2 gallons. What is the standard deviation of demand during lead time?

Which item would be least likely to be ordered under a fixed-order-interval system?