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Exam 18: Inventory Management

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Question 51

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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?

A) 20* 2
B) 20* 10
C) 2 times the square root of 20
D) 2 times the square root of 10
E) 40 days

F) A) and B)
G) B) and E)

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Question 52

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In the single period model,the service level is the probability that demand will not exceed the stocking level in any period.

A) True
B) False

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Question 53

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Inspection of goods for quality and quantity upon arrival is part of ordering cost.

Warehousing costs,insurance costs,and spoilage costs are all associated with holding costs.

Relative to the basic EOQ model,the introduction of quantity discounts will cause the optimum order quantity to be:

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

Ann Chovies,owner of the Perfect Pasta Pizza Parlour,uses 20 pounds of pepperoni each day in preparing pizzas.Order costs for pepperoni are $10.00 per order,and holding costs are 4 cents per pound per day.Lead time for each order is 3 days,and the pepperoni itself costs $3.00 per pound. Without allowing for safety stock,what reorder point should be used to reorder pepperoni?

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

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

The materials manager for a billiard ball maker must periodically place orders for resin,one of the raw materials used in producing billiard balls.She knows that manufacturing uses resin at a rate of 50 kilograms each day,and that it costs $.04 per day to hold a kilogram of resin in inventory.She also knows that the order costs for resin are $100 per order,and that the lead time for delivery is four (4) days. If the order size was 1,000 kilograms of resin,what would be the daily total inventory costs,EXCLUDING the cost of the resin?

Many retail operations which deal with multiple items from the same supplier often use fixed interval ordering rather than reorder point models.

Which of the following is not a suggestion for an inventory storage system?

In the basic EOQ model,an annual demand of 40 units,an ordering cost of $5,and a holding cost of $1/unit per year will result in an EOQ of:

Ann Chovies,owner of the Perfect Pasta Pizza Parlour,uses 20 pounds of pepperoni each day in preparing pizzas.Order costs for pepperoni are $10.00 per order,and holding costs are 4 cents per pound per day.Lead time for each order is 3 days,and the pepperoni itself costs $3.00 per pound. What is the economic order quantity for pepperoni?

The fixed order interval model requires a continuous monitoring of inventory levels.

Total cost in the EOQ with quantity discount model is calculated in the same way as it is in the basic EOQ model.

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

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

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 holding cost is 8% of price. 11eab92b_c486_9d85_99e6_3bafb456844b

Ann Chovies,owner of the Perfect Pasta Pizza Parlour,uses 20 pounds of pepperoni each day in preparing pizzas.Order costs for pepperoni are $10.00 per order,and holding costs are 4 cents per pound per day.Lead time for each order is 3 days,and the pepperoni itself costs $3.00 per pound. If she were to order 80 pounds of pepperoni at a time,what would be the average inventory level?