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Exam 12: Inventory Management

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Question 81

True/False

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The A-B-C approach involves classifying inventory items based on their unit cost.

A) True
B) False

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Question 82

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Which is not considered a holding cost?

A) Warehousing costs
B) Insurance
C) Building depreciation
D) Opportunity cost of funds
E) Preparing purchase orders

F) B) and D)
G) A) and D)

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Question 83

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What function of inventory is the term "anticipation inventory" associated with?

The single period model can be very helpful in determining when to order.

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

Which of the following does not match with respect to inventory counting and replenishment models?

The EOQ approach minimizes the annual ordering cost of inventory.

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

Both the reorder point (ROP)and fixed order interval models factor in the amount of inventory on hand (inventory position)when placing an order,but for different situations.

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

What is the economic order quantity?

In the single period model,if excess cost is double shortage cost,the approximate stock-out risk,assuming an optimum service level,is:

In the fixed order interval model,also known as the order up to level model,the order size is the same for each cycle.

What is the economic order quantity for pepperoni?

The reorder point (ROP)models for inventory management are used to calculate the time between orders.

Effective use of inventories would be implied from which of the following? I.High number of back orders II.Low inventory turnover III.High numbers of days of inventory

A car rental agency uses 96 boxes of staples a year.The boxes cost $4 each.It costs $10 to order staples,and holding costs are $0.80 per box on an annual basis. Determine: (i)the order quantity that will minimize the sum of ordering and holding boxes of staples (ii)the annual cost of ordering and carrying the boxes of staples

Demand for a product with a unit ordering cost of $150 is 800 units per year,holding cost per unit per year is $10,and backorder cost is estimated to be $20 per unit per year.What amount of savings,if any,would there be in total annual inventory cost by using planned shortages instead of a basic economic order quantity?

If unsold copies can be returned for half credit and copies sell for $4.25 each,what is the optimal stocking level and its effective service level?