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Exam 12: Inventory Management

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Question 81

Multiple Choice

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Which of the following statements regarding Amazon.com is false?

A) The company was opened by Jeff Bezos in 1995.
B) The company was founded as, and still is, a "virtual retailer" with no inventory.
C) The company is now a world-class leader in warehouse management and automation.
D) The company uses both United Parcel Service and the U.S. Postal Service as shippers.
E) Amazon obtains its competitive advantage through inventory management.

F) All of the above
G) A) and B)

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Question 82

True/False

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In the quantity discount model, the cost of acquiring goods (product cost) is not a factor in determining lot size.

A) True
B) False

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Question 83

Essay

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Perform an ABC analysis on the following set of products.

In the production order quantity (POQ) model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a larger lot size than in an otherwise identical EOQ problem.

How sensitive is the EOQ to variations in demand or costs?

Describe the difference between a fixed-quantity and a fixed-period inventory system?

The primary purpose of the basic economic order quantity model shown below is Q* =

One advantage of cycle counting is that it maintains accurate inventory records.

Daily demand for a product is normally distributed with a mean of 150 units and a standard deviation of 15 units. The firm currently uses a reorder point system, and seeks a 75% service level during the lead time of 6 days. a. What safety stock is appropriate for the firm? b. What is the reorder point?

Consider a local club selling Christmas trees. If demand is normal with a mean of 200 and a standard deviation of 50, how many trees should the club stock if service level must be greater than 95%?

What are the main reasons that an organization has inventory?

A local artisan uses supplies purchased from an overseas supplier. The owner believes the assumptions of the EOQ model are met reasonably well. Minimization of inventory costs is her objective. Relevant data, from the files of the craft firm, are annual demand (D) =150 units, ordering cost (S) = $42 per order, and holding cost (H) = $4 per unit per year a. How many should she order at one time? b. How many times per year will she replenish her inventory of this material? c. What will be the total annual inventory costs associated with this material? d. If she discovered that the carrying cost had been overstated, and was in reality only $1 per unit per year, what is the corrected value of EOQ?

__________ is a continuing reconciliation of inventory with inventory records.

Demand for gallons of milk is normal with a weekly mean of 50 and standard deviation of 15. How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car. Paper sales are normally distributed, with a mean of 100 and standard deviation of 10. He sells papers for $.5 and pays $.30 for them. Unsold papers are trashed with no salvage value. How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?

A disadvantage of the fixed-period inventory system is that

One function of inventory is to take advantage of quantity discounts.

The fixed-period inventory model requires more safety stock than the fixed-quantity models because

Which of the following statements about ABC analysis is false?

Demand for a product is approximately normal, averaging 5 units per day with a standard deviation of 1 unit per day. Lead time for this product is approximately normal, averaging 10 days with a standard deviation of 3 days. What reorder point provides a service level of 90 percent?