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Exam 12: Inventory Management

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Question 1

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A machine is expected to use approximately three spare parts during its useful life.The spares cost $200 each and have no salvage value or other use.The manager has ordered five spares.Assuming a Poisson usage rate,what range of shortage cost is implied?

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Ce = $200 Mean = 3 (Poisson) Cs = ? From Appendix B Table C,the service level must be between .815 and .916 for five to be optimum. 11ea6917_4566_2db8_80d0_a7315213b7dc_TB2512_00 Solving for Cs yields $881.08 to $2,180.95.

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EOQ inventory models are primarily concerned with the timing of orders.

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B) False

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The reorder point (ROP)models determine the point at which the inventory,in terms of quantity must be reordered.

The overall objective of inventory management is to achieve satisfactory levels of customer service by having sufficient quantities while keeping inventory costs reasonable.

HoldM4U Company distributes a specialized air purifier.They are considering allowing backorders,with an estimated cost of $200 per unit per year.The annual demand is 81,000 units,the annual holding cost is 10% of the item cost and the unit cost of this item is $1,000.The ordering cost is $500 per order. a.Determine the optimal order quantity and total annual inventory cost using the basic EOQ model with no backorders. b.Determine the optimal order quantity and backorder quantity and total annual inventory cost using the EOQ with planned shortages model. c.Should the company allow backorders?

Laser scanning of universal product codes at retail checkout counters provides which of the following advantages? I.Increased speed and accuracy at checkout II.Continuous information on inventories III.Improved levels of customer service IV.Elimination of periodic counting of inventory

In the basic EOQ model,at the optimal order quantity annual holding cost is equal to the annual ordering cost.

The purpose of "cycle counting" is to:

Given the following data for a particular inventory item: -For the economic order quantity,what is the reorder point?

If he were to order 16 cases of Stein beer at a time,what would be the length of an order cycle?

In the A-B-C approach to classify inventory,items that have high unit costs are always classified as "A" category items.

In the A-B-C classification of inventory,items classified under the "A" category typically have high unit costs,but low levels for annual dollar value (ADV).

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

The fixed order interval model would most likely to be used for which of the following situations?

In a single period model,if shortage cost is four times excess cost,then the optimum service level is:

In the basic EOQ model,if annual demand doubles,the effect on the EOQ is that:

If unsold copies can be returned for half credit and the owner stocks ten copies,what is the implied range of shortage cost?

The demand rate is not one of the factors used in determining the reorder point ROP.

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

Given the following data for a particular inventory item: -For the economic order quantity,what are average weekly total costs,including the cost of the inventory item?