Taylor Mgmt-Science10 Tif 16

Introduction to Management Science, 10e (Taylor)
Chapter 16 Inventory Management

1) Independent demand items are used internally to produce a final product.
Answer: FALSE
Diff: 2 Pae !ef: "##
$ain %eadin: Elements of In&entory $anaement
'ey words: dependent demand items
2) Dependent demand items are final products demanded (y an e)ternal customer.
Answer: FALSE
'ey words: independent demand items
*) In&entory costs include carryin+ orderin+ and s,ortae costs.
Answer: -!.E
'ey words: in&entory costs
#) -,e purpose of in&entory manaement is to determine ,ow muc, and w,en to order.
Answer: -!.E
Diff: 1 Pae !ef: "#/
'ey words: in&entory manaement
0) In a continuous in&entory system+ a constant amount is ordered w,en in&entory declines to a
predetermined le&el.
Answer: -!.E
$ain %eadin: In&entory 1ontrol Systems
'ey words: in&entory control systems+ continuous in&entory system
/) In a periodic in&entory system+ a constant amount is ordered w,en in&entory declines to a
predetermined le&el.
Answer: FALSE
Diff: 2 Pae !ef: "#"
'ey words: continuous in&entory system
1
1opyri,t 2 2313 Pearson Education+ Inc. Pu(lis,in as Prentice %all
") -,e E45 is t,e optimal order 6uantity t,at will minimi7e total carryin costs.
Answer: FALSE
Diff: 2 Pae !ef: "#8
$ain %eadin: -,e 9asic E45 $odel
'ey words: economic order 6uantity models+ E45 models
8) Assumptions of t,e (asic E45 model include constant demand+ no s,ortaes+ constant lead
time+ and radual usae.
Answer: FALSE
:) -,e non;instantaneous receipt model applies only to manufacturin.
Answer: FALSE
Diff: * Pae !ef: "0#
$ain %eadin: -,e E45 $odel wit, <on;Instantaneous !eceipt
'ey words: E45 model wit, non;instantaneous receipt
13) -,e E45 model wit, s,ortaes does not allow (ac=orders.
Answer: FALSE
Diff: * Pae !ef: "0/
$ain %eadin: -,e E45 $odel wit, S,ortaes
'ey words: E45 model wit, s,ortaes
11) -,e (asic E45 model plays no role in determinin order si7es in t,e presence of 6uantity
discounts.
Answer: FALSE
Diff: 2 Pae !ef: "/1
$ain %eadin: 5uantity Discounts
'ey words: E45 model 6uantity discounts
12) 5uantity discounts are always e&aluated wit, carryin cost as a percentae of price.
Answer: FALSE
'ey words: E45 model 6uantity discounts
1*) -,e ser&ice le&el is t,e pro(a(ility t,at t,e in&entory a&aila(le durin lead time will meet
demand.
Answer: -!.E
$ain %eadin: Determinin Safety Stoc=s .sin Ser&ice Le&els
'ey words: ser&ice le&el+ safety stoc=s
2
1#) If ser&ice le&el is 03>+ t,en safety stoc= is e6ual to 03> of lead time demand.
Answer: FALSE
'ey words: safety stoc=s+ ser&ice le&els
10) -,e reorder point is t,e date w,en a new order s,ould (e placed.
Answer: FALSE
Diff: 1 Pae !ef: "//
$ain %eadin: !eorder Point and Safety Stoc=
'ey words: reorder point
1/) If lead time and demand are constant+ safety stoc= is e6ual to demand multiplied (y lead
time.
Answer: FALSE
$ain %eadin: !eorder Point and Safety Stoc=
'ey words: safety stoc=
1") Periodic in&entory systems normally re6uire smaller safety stoc= t,an a continuous in&entory
system.
Answer: FALSE
Diff: 2 Pae !ef: ""2
$ain %eadin: Economic 4rder 5uantity $odels
'ey words: periodic in&entory system
18) -ec,ni6ues for in&entory analysis are widely used to analy7e ot,er types of pro(lems.
Answer: FALSE
Diff: 2 Pae !ef: ""*
'ey words: in&entory system
1:) 1arryin costs include storae cost+ interest and depreciation.
Answer: -!.E
23) 4rderin costs include transportation+ s,ippin and inspection.
Answer: -!.E
*
21) S,ortae costs include loss of customer oodwill.
Answer: -!.E
22) If a (usiness fre6uently runs out of in&entory t,eir ser&ice le&els are neati&e.
Answer: FALSE
'ey words: ser&ice le&el
2*) ?????????? demand items are enerally final products demanded (y customers.
Answer: independent
2#) -,e purpose of in&entory manaement is to determine ?????????? and ?????????? to
order.
Answer: ,ow muc,@w,en
20) ?????????? demand items are used internally to produce a final product.
Answer: dependent
2/) In&entory ?????????? costs include storae cost and t,e cost of capital.
Answer: carryin
'ey words: carryin cost
2") In&entory ?????????? costs include transportation and inspection.
Answer: orderin
'ey words: orderin costs
#
28) A ?????????? occurs w,en customer demand cannot (e met (ecause of insufficient
in&entory.
Answer: s,ortae or stoc= out
Diff: 2 Pae !ef: "0/
'ey words: s,ortae or stoc= out costs
2:) In a ?????????? in&entory system+ a constant amount is ordered w,en in&entory declines to
a predetermined le&el.
Answer: continuous
*3) In a ?????????? in&entory system an order is placed for a &aria(le amount after a fi)ed
passae of time
Answer: periodic
*1) ?????????? is t,e optimal order 6uantity t,at will minimi7e t,e total in&entory costs.
Answer: E45 or economic order 6uantity
'ey words: economic order 6uantity+ E45
*2) A ?????????? occurs w,en an item is out of stoc= and is sold to t,e customer w,en a
s,ipment arri&es.
Answer: (ac=order
Diff: 2 Pae !ef: "0"
'ey words: economic order 6uantity model+ E45 model assumptions
**) 1osts in&ol&ed in a typical in&entory model include ?????????? and ??????????.
Answer: carryin costs and orderin costs
'ey words: E45 model+ a&erae in&entory
0
*#) In t,e (asic E45 model+ as t,e si7e of t,e order increases+ t,e annual ?????????? cost
decreases.
Answer: orderin
'ey words: economic order 6uantity model in&entory costs+ orderin costs
*0) In t,e (asic E45 model+ as t,e si7e of t,e order increases+ t,e annual ?????????? cost
increases.
Answer: carryin
'ey words: economic order 6uantity model+ in&entory costs+ carryin costs
*/) In t,e 6uantity discounts model+ t,e ?????????? must (e included in t,e total cost
calculation. -,is &aria(le is not included in t,e (asic E45 model.
Answer: purc,ase price
'ey words: economic order 6uantity model in&entory costs+ carryin costs
*") If all t,e &aria(les are ,eld constant+ t,e total in&entory cost in a non;instantaneous receipts
model is ?????????? t,an t,e total cost in t,e (asic E45 model.
Answer: larer or ,i,er
Diff: * Pae !ef: "0#
'ey words: production lot si7e model+ non;instantaneous receipts model
*8) -,e ?????????? determines w,en an order s,ould (e placed for a continuous re&iew
in&entory system.
Answer: reorder point
Diff: 1 Pae !ef: "/"
*:) ?????????? is in&entory t,at is used to ,elp protect aainst stoc=outs.
Answer: Safety Stoc=
/
#3) ?????????? is t,e pro(a(ility t,at t,e in&entory a&aila(le durin t,e lead time will meet
demand.
Answer: Ser&ice le&el
'ey words: ser&ice le&el
#1) If lead time and demand are constant t,en ?????????? is 7ero.
Answer: safety stoc=
#2) For t,e ?????????? in&entory system+ 5+ t,e 6uantity ordered+ can &ary.
Answer: periodic
#*) -,e E45 model is ?????????? + or resistant to errors in t,e cost estimates and demand.
Answer: ro(ust
Diff: 2 Pae !ef: "0*
##) ?????????? costs and ????????? costs react in&ersely to eac, ot,er in response to an
increase in order si7e.
Answer: 1arryin and orderin
#0) -,e (asic E45 model assumes t,at ?????????? is =nown wit, certainty and is relati&ely
constant o&er time.
Answer: demand
'ey words: E45 model+ econ order 6uantity models+ assumption of E45 models
#/) In t,e (asic E45 model+ if DA83 per mont,+ 1
o
AB1*+ and 1
c
AB11 per unit per mont,+ w,at
is t,e E45C
Answer: 1*."0
Diff: 1 Pae !ef: "02
'ey words: E45 model+ economic order 6uantity models
"
#") In t,e (asic E45 model+ if DA#3 per mont,+ 1
o
AB:+ and 1
c
AB8 per unit per mont,+ w,at is
t,e E45C
Answer: :.#:
#8) In t,e (asic E45 model+ if DA133 per mont,+ 1
o
AB23+ and 1
c
AB10 per unit per mont,+ w,at
is t,e E45C
Answer: 1/.**
#:) In t,e (asic E45 model+ if annual demand is 03 units+ carryin cost is B2 per unit per year+
and orderin cost is B10+ w,at is t,e E45C
Answer: 2".*:
A company produces item D+ and uses t,e (asic E45 model for manain its in&entory. Lead
time to o(tain item D is two wee=s. Demand is normally distri(uted wit, a mean of #33 units per
wee= and a standard de&iation of #3 units per wee=. -,e desired ser&ice le&el is :8.0>. -,e
orderin cost is B23+ and carryin cost is 23> of t,e items cost+ w,ic, is B13.
03) Determine t,e order 6uantity for product D. EAssume 02 wee=s of operation per year.)
Answer: #0/.3"
'ey words: economic order 6uantity model+ E45 model
01) Determine t,e annual setup cost and t,e annual carryin cost for product D. EAssume 02
wee=s of operation per year.)
Answer: #0/.3"
'ey words: t,e annual setup cost+ economic order 6uantity models
02) Determine t,e total annual in&entory cost for product D. Include t,e item cost in your
calculations. EAssume 02 wee=s of operation per year.)
Answer: 13#+:12
'ey words: t,e annual setup cost+ economic order 6uantity models
8
0*) Determine t,e reorder point for product D.
Answer: 022."/
$ain %eadin: !eorder Point
'ey words: economic order 6uantity models+ reorder point
-,e inFection moldin department of Al&er Inc. uses an a&erae of #3 pounds of a special
powder per day. -,e plant operates 203 days per year. -,e daily usae of t,e powder is normally
distri(uted wit, a standard de&iation of 0 pounds per day. -,e lead time to o(tain t,e powder
from a supplier is : days. -,e annual ,oldin cost is B2. per unit and t,e cost of orderin t,e
powder is B03.
0#) %ow many units s,ould Al&er Inc. order in order to minimi7e annual orderin and carryin
costC
Answer: "3".11
'ey words: economic order 6uantity model
00) %ow many orders will (e placed eac, yearC
Answer: 1#.1# orders
'ey words: economic order 6uantity model+ num(er of orders
0/) Determine t,e reorder point for a ser&ice le&el of :">.
Answer: *88.2 units
'ey words: reorder point+ ser&ice le&el
-,e daily sales of a peanut (utter at PowerGs Hrocery are normally distri(uted+ wit, a mean of 12
Fars and a standard de&iation of #. -,e manaer c,ec=s t,e in&entories on s,el&es and places an
order e&ery t,ree days. Deli&ery lead time is two days.
0") %ow muc, safety stoc= of peanut (utter s,ould t,ey ,a&e for a ::> ser&ice le&elC
Answer: Z = 2.33, r = 3, and L = 2
SS = 2.33 (4)(5)
1/2 = 20.8 or 21 jars
'ey words: payoff ta(le
:
08) If t,ere are # Fars on t,e s,elf w,en an order is placed+ ,ow muc, s,ould t,e store orderC
Answer: Base stock level =
d
(t
! L) ! sa"et# stock = 12(5) ! 21 = $0 ! 21 = 81.

%rder &'ant(t# = 81 ) 4 = ** o+es.
'ey words: payoff ta(le
0:) -,e daily demand for a product is normally distri(uted wit, a mean of 83 and a standard
de&iation of 8. 1onstant lead time is # days. -,e cost of placin an order is B23. -,e item costs
B8 and t,e carryin rate per year is 13> of t,e item cost. Determine t,e economic order 6uantity.
Answer: 123:
/3) In a non;instantaneous receipt model+ daily demand is 00 units and daily production is 123
units+ 1oAB"3 and 1cAB# per unit@year. -,e production facility operates *33 days per year. I,at
is t,e ma)imum in&entory le&elC
Answer: #11./* units
Diff: 1 Pae !ef: "0#;"00
'ey words: E45 model wit, non;instantaneous receipt
/1) In a non;instantaneous receipt model+ daily demand is 00 units and daily production is 123
units+ 1oAB"3 and 1cAB# per unit@year. -,e production facility operates *33 days per year. I,at
is t,e optimal order 6uantityC
Answer: "0:.:*
Diff: 1 Pae !ef: "0#;"00
'ey words: non;instantaneous receipt model+ economic production model
/2) A product ,as an annual demand of */33 units. .nit cost for t,is product is B*. Set up cost is
B23 and t,e in&entory carryin rate as a percent of t,e unit cost is 20>. -,e product is produced
in;,ouse w,ere t,e daily production rate is 03 units. Assume */3 wor=in days per year and
determine t,e economic production 6uantity.
Answer: #:3 units
Diff: 2 Pae !ef: "0#;"00
'ey words: econ order@prod 6uantity+ non;instantaneous receipts model
13
/*) A product ,as an annual demand of */33 units. .nit cost for t,is product is B*. Set up cost is
B23 and t,e in&entory carryin rate as a percent of t,e unit cost is 20>. -,e product is produced
in;,ouse w,ere t,e daily production rate is 03 units. Assume */3 wor=in days per year and
determine t,e annual orderin cost and carryin cost.
Answer: B1#" and B1#" for a total of B2:#.
Diff: 2 Pae !ef: "0#;"00
'ey words: econ order@prod 6uant+ non;instant receipt mod+ an order@carry cost
/#) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
1cAB" per unit per year and 1
S
AB20+ w,at is t,e total annual s,ortae costC
Answer: 2:/.01
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e total annual s,ortae cost
/0) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
S
AB20+ w,at is t,e optimal order 6uantityC
Answer: 5
opt
A #:0."# units
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e optimal order 6uantity
//) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
S
AB20+ w,at is t,e annual orderin costC
Answer: 1*00.00
Diff: 2 Pae !ef: "0";"08
'ey words: t,e annual orderin cost+ E45 model wit, s,ortaes
/") Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
S
AB20+ w,at is t,e optimal stoc= out le&elC
Answer: S
opt
A 138.## units
Diff: 2 Pae !ef: "0";"08
'ey words: optimal stoc= out le&el+ E45 model wit, s,ortaes
/8) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
S
AB20+ w,at is t,e annual carryin costC
Answer: 130:.3*
Diff: 2 Pae !ef: "0";"08
'ey words: t,e annual carryin cost+ E45 model wit, s,ortaes
11
/:) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
S
AB20+ w,at is t,e total minimum annual in&entory costC
Answer: -1
min
A 2"11.3:
Diff: 2 Pae !ef: "0";"08
'ey words: total minimum annual in&entory cost+ E45 model wit, s,ortaes
A company distri(utes repair parts for ,i, end appliances. -,e annual demand is 81+333 and t,e
company operates *33 days per year. -,e annual carryin cost is 23> of t,e item cost+ w,ic, is
B033. -,e orderin cost is estimated at B/3 and t,e s,ortae cost is B103.
"3) Determine t,e optimal order 6uantity.
Answer: #32.0
Diff: 2 Pae !ef: "0";"08
"1) Determine t,e optimal s,ortae le&el.
Answer: 1/1
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e optimal s,ortae le&el
"2) %ow many order per year will t,ey placeC
Answer: 231
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e annual carryin cost
"*) I,at is t,e ma)imum in&entory le&elC
Answer: 2#2
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e annual setup cost
"#) Determine t,e annual s,ortae cost.
Answer: B#+8*3
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e annual s,ortae cost
12
"0) If t,e daily demand is *3 and t,e lead time in days is *+ w,at is t,e reorder pointC
Answer: :3
"/) If t,e daily demand is /" and t,e lead time in days is 2+ w,at is t,e reorder pointC
Answer: 1*#
"") If t,e daily demand is 20 and t,e lead time in days is #+ w,at is t,e reorder pointC
Answer: 133
"8) Sonny LawlerGs law office uses E45 models to manae t,eir office supplies. -,eyG&e (een
orderin in= refills for t,eir printers in 6uantities of /3 units. -,e firm estimates carryin cost at
#3> of t,e B13 unit cost and t,at annual demand is a(out 2#3 units per year. -,e assumptions of
t,e (asic E45 model are t,ou,t to apply. For w,at &alue of orderin cost would its action (e
optimalC
Answer: B*3
":) Dana SworGs Dream Store sells wei,t loss products. %er (est;sellin item+ an enery (ooster
and fat (urnin pill+ ,as an annual demand of #33 units. 4rderin cost is B#3 and carryin cost
is B0 per unit year. %ow many units s,ould s,e order to minimi7e total in&entory costsC
Answer: 83
'ey words: E45 model
83) Annual demand for a paper(ac= dictionary at t,e (oo=store is 1233 units. 4rderin costs are
*03+ carryin costs are B/ per unit per year+ and t,e lead time is : days. -,e (oo=store is open
for *33 days of t,e year. I,at is t,e reorder point C
Answer: */
1*
81) If a&erae demand for an in&entory item is 233 units per day+ lead time is * days+ and safety
stoc= is 133 units+ w,at is t,e reorder pointC
Answer: "33
'ey words: safety stoc=+ reorder point
82) If a&erae demand for an in&entory item is 183 units per day+ lead time is 0 days+ and safety
stoc= is :3 units+ w,at is t,e reorder pointC
Answer: ::3
8*) Annual demand for notecards at Su7ieGs Stationery s,op is 13+333 units. Deli&eries ta=e
a(out 0 wor=in days and Su7ie operates *33 days per year. 1alculate t,e reorder point for t,e
notecards t,at s,e stoc=s.
Answer: 1/" notecards A **.** J 0
A (a=ery uses an a&erae of /3 ounces of oranic orane Fuice daily. Demand is normally
distri(uted wit, a standard de&iation of 10 ounces. -,e (a=ery places orders e&ery se&en days.
-,e lead time for deli&ery of t,e Fuice is t,ree days.
8#) 1ompute t,e safety stoc= re6uired to ac,ie&e a :8> ser&ice le&el
Answer: :" ounces
80) If t,e (a=ery ,as 1:3 ounces at t,e time an order is placed+ ,ow muc, s,ould (e orderedC
Answer: /:" ; 1:3 A 03" ounces
1#
8/) -,e daily demand for a product is normally distri(uted wit, a mean of 83 and a standard
de&iation of 8. 1onstant lead time is # days. -,e cost of placin an order is B23. -,e item costs
B8 and t,e carryin rate per year is 13> of t,e item cost. Determine t,e reorder point to satisfy
:3> of t,e orders.
Answer: *#3.#8
'ey words: economic order 6uantity+ reorder point
8") A (a=eryGs use of corn syrup is normally distri(uted wit, a mean of 03 allons per day and a
standard de&iation of 0 allons per day. Lead time for deli&ery of t,e syrup is normal wit, a
mean of # days and a standard de&iation of 2 days. -,e manaer wants a ser&ice le&el of ::
percent. 1alculate t,e reorder point.
Answer: #*# allons
Diff: * Pae !ef: "/8
'ey words: reorder point+ &aria(le demand+ &aria(le lead time
88) A (a=eryGs use of corn syrup is normally distri(uted wit, a mean of 03 allons per day and a
standard de&iation of 0 allons per day. Lead time for deli&ery of t,e syrup is normal wit, a
mean of # days and a standard de&iation of 2 days. -,e manaer reorders w,en ,is in&entory
drops to *33 allons. I,at cycle ser&ice le&el is implied (y t,is policyC
Answer: 7 A .::0+ so ser&ice le&el A 8#>
'ey words: reorder point+ &aria(le demand@lead time+ ser&ice le&el
8:) A manaer ,as Fust recei&ed a re&ised price sc,edule from a &endor. I,at order 6uantity
s,ould t,e manaer use in order to minimi7e total costsC Annual Demand is 123 units+ orderin
cost is B13+ and annual carryin cost is B1 per unit.
5uantity .nit Price
1;0: B10
/3;:: B1#
133 or more B1*
Answer: 4ptimal 5 A #:. -1E#:) A B18#:K -1E/3)AB1"*3K -1 E133) A B1/22+ so order 133.
Diff: * Pae !ef: "/2;"/*
'ey words: 6uantity discounts+ constant carryin cost per unit
10
:3) An office manaer uses #33 (o)es of file folders per year. -,e price is B8.03 per (o) for an
order si7e of 1:: (o)es or less+ B8.33 per (o) for orders of 233 to ":: (o)es+ and B".03 per (o)
for an order of 833 or more (o)es. 1arryin cost is 23 percent of t,e price of t,e product and
orderin costs are B83. I,at order 6uantity minimi7es total annual costC
Answer: 4ptimal 5 A 1:#. -1 E1:#) A B*"*3K -1 E233) A B*023K -1 E833) A B*/#3+ so order
233.
Diff: * Pae !ef: "/*;"/#
'ey words: 6uantity discounts+ carryin cost as percent of price
:1) ?????????? demand items are used internally to produce a final product.
A) Independent
9) Dependent
1) Assumed
D) Internal
E) Interated
Answer: 9
:2) ?????????? demand items are final products demanded (y an e)ternal customer.
A) Assumed
9) Dependent
1) Independent
D) E)ternal
E) Interated
Answer: 1
'ey words: independent demand
:*) In&entory costs include
A) carryin
9) orderin
1) s,ortae costs
D) all of t,e a(o&e
Answer: D
1/
:#) -,e purpose of in&entory manaement is to determine
A) timin and cost of orders
9) 6uantity and cost of orders
1) timin and 6uantity of orders
D) orderin and carryin costs
Answer: 1
:0) A =ey(oard costs B1+333+ and t,e annual ,oldin cost is 20>. Annual demand is 13+333
units+ and t,e order cost is B103 per order. I,at is t,e appro)imate economic order 6uantityC
A) 1/
9) "3
1) 113
D) 18*
Answer: 1
Diff: * Pae !ef: "02
:/) In aEn) ?????????? in&entory system a constant amount is ordered w,en in&entory declines
to a predetermined le&el.
A) optimal
9) economic
1) periodic
D) continuous
Answer: D
:") In aEn) ?????????? in&entory system+ an order is placed for a &aria(le amount after a fi)ed
passae of time.
A) periodic
9) continuous
1) optimal
D) economic
Answer: A
1"
:8) E45 is aEn) ?????????? in&entory system.
A) periodic
9) continuous
1) optimal
D) economic
Answer: 9
Diff: * Pae !ef: "#/
::) E45 is t,e optimal order 6uantity t,at will ?????????? total in&entory costs.
A) ma)imi7e
9) minimi7e
1) steady
D) maintain
E) impro&e
Answer: 9
133) Assumptions of t,e E45 model include
A) constant demand and no s,ortaes
9) constant lead time
1) instantaneous order receipt
D) all of t,e a(o&e
Answer: D
131) In t,e (asic E45 model+ if lead time increases from 0 to 13 days + t,e E45 will
A) dou(le
9) increase+ (ut not (y dou(le t,e amount
1) remain t,e same
D) decrease
Answer: 1
'ey words: E45 model+ econ order 6uantity models+ assumption of E45 models
18
132) -,e economic production 6uantity is 033 units Eunits are deli&ered to t,e user department as
t,ey come off t,e production line). If t,e firm decides to (uy t,is item from an outside supplier
rat,er t,an producin it+ t,e economic purc,ase 6uantity would pro(a(ly (e Eassume t,at
in&entory costs of production and purc,asin an item are t,e same):
A) less t,an 033 units
9) more t,an 033 units
1) 033 units
D) t,e direction of c,ane in 6uantity cannot (e determined wit,out additional information
Answer: 9
'ey words: economic production 6uantity model+ non;instant receipts model
13*) If order 6uantity is increased+ annual ,oldin cost ??????????+ annual order cost
??????????+ and c,ane in annual total cost ??????????.
A) decreases+ increases+ is positi&e
9) decreases+ increases+ can not (e determined
1) decreases+ decreases+ can not (e determined
D) increases+ decreases+ is neati&e
E) increases+ decreases+ can not (e determined
Answer: E
13#) -,e E45 minimi7es total ?????????? cost.
A) in&entory
9) purc,ase
1) orderin
D) mar=etin
E) carryin
Answer: 1
'ey words: E45 model+ economic order 6uantity models+ in&entory costs
1:
130) In an E45 model+ as t,e carryin cost increases+ t,e order 6uantity :
A) increases.
9) decreases.
1) remains t,e same
D) cannot (e determined
Answer: 9
13/) In t,e (asic E45 model+ if DA/3 per mont,+ SAB12+ and %AB13 per unit per mont,+ w,at is
t,e E45C
A) 11
9) 12
1) 1*
D) 1#
Answer: 9
13") In t,e (asic E45 model+ if annual demand is 03+ carryin cost is B2 per unity per year+ and
orderin cost is B10+ w,at is t,e E45C
A) 2".*:
9) 2/.*:
1) 20.*:
D) 2#.*:
E) 22.*:
Answer: A
23
138) -,e daily sales of a peanut (utter at PowerGs Hrocery are normally distri(uted+ wit, a mean
of 12 Fars and a standard de&iation of #. -,e manaer c,ec=s t,e in&entories on s,el&es and
places an order e&ery t,ree days. Deli&ery lead time is two days and t,ey carry 21 Fars for safety
stoc=. If t,ere are # Fars on t,e s,elf w,en an order is placed+ ,ow muc, s,ould t,e store orderC
A) ""
9) 81
1) *2
D) */
E) cannot (e determined from t,e information pro&ided
Answer: A
'ey words: periodic re&iew
13:) In a non instantaneous receipt model+ daily demand is 00 units and daily production is 123
units+ 1oAB"3 and 1cAB# per unit per year. I,at is t,e ma)imum in&entory le&elC EAssume t,at
t,e facility is open */0 days per year)
A) /1/.:
9) /18.#
1) /23.*
D) /22.:
E) /20.0
Answer: A
Diff: 2 Pae !ef: "0#;"00
'ey words: non;instantaneous receipt model
113) A firm is presently purc,asin an itme for in&entory usin t,e (asic E45 model. -,ey plan
on ma=in t,e product t,emsel&es and will (e usin t,e E45 model (ased on non;instantaneous
receipt of in&entory. If e&eryt,in else stays t,e same+ w,at c,anes s,ould t,e firm e)pectC
A) E45 decreases
9) -otal rele&ant in&entory Eannual setup and annual carryin) cost increase
1) A&erae in&entory le&el decreases
D) !eorder point increases
E) Safety stoc= increases
Answer: 1
Diff: * Pae !ef: "0#;"00
21
111) I,en usin t,e E45 Formula wit, non;instantaneous production+ as t,e demand rate ED)
increases more t,an t,e rate of production+ t,e E45:
A) increases
9) decreases
1) remains t,e same
D) cannot (e determined
Answer: A
Diff: * Pae !ef: "0#;"00
112) -,e diaram a(o&e represents w,ic, type of in&entory modelC
A) Economic 4rder 5uantity EE45)
9) E45 wit, <oninstantaneous !eceipt
1) Economic Production 5uantity
D) Fi)ed Period $odel
E) none of t,e a(o&e
Answer: 9
Diff: 1 Pae !ef: "0#;"00
'ey words: E45 wit, noninstantaneous receipt
22
11*) -,e slope of t,e line la(eled L9L in t,e diaram a(o&e is:
A) 4rder rate
9) !ate of in&entory demand
1) Production rate
D) S,ippin rate
E) Production rate minus rate of in&entory demand
Answer: E
Diff: 2 Pae !ef: "0#;"00
11#) -,e slope of t,e line la(eled LAL in t,e diaram (elow is:
A) 4rder rate
1) Production rate
D) S,ippin rate
Answer: 1
Diff: * Pae !ef: "0#;"00
110) -,e slope of t,e line la(eled L1L in t,e diaram (elow is:
A) 4rder rate
1) Production rate
D) S,ippin rate
Answer: 9
Diff: 2 Pae !ef: "0#;"00
11/) -,e inter&al la(eled LEL in t,e diaram (elow is:
A) Production cycle
9) Production run lent,
1) S,ippin lead time
D) In&entory fill rate
Answer: A
Diff: * Pae !ef: "0#;"00
2*
11") -,e inter&al la(eled LDL in t,e diaram (elow is:
A) Production cycle
9) Production run lent,
1) S,ippin lead time
D) In&entory fill rate
Answer: 9
Diff: 1 Pae !ef: "0#;"00
118) A product ,as demand durin lead time of 133 units+ wit, a standard de&iation of 20 units.
I,at safety stoc= Eappro)imately) pro&ides a :0> ser&ice le&elC
A) #1
9) 00
1) :0
D) 1#3
Answer: A
11:) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
s
AB20+ w,at is t,e total annual s,ortae costC
A) 2:#."2
9) 2:/.01
1) 2:8.0*
D) 2::.1"
E) 280.:1
Answer: 9
Diff: 2 Pae !ef: "0";"08
123) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
s
AB20+ w,at is t,e order 6uantityC
A) *:#."2
9) 280.:1
1) #:0."#
D) 2:/.01
E) #0/.*#
Answer: 1
Diff: 2 Pae !ef: "0";"08
2#
s
AB20+ w,at is t,e optimal stoc= out le&elC
A) :/.##
9) 132.*/
1) 138.##
D) 11#./#
E) 121.#*
Answer: 1
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e optimal stoc= out le&el
s
AB20+ w,at is t,e annual carryin costC
A) 2"11.3:
9) 130:.3*
1) 1*00.00
D) 2:/.01
E) #:0."#
Answer: 9
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e annual carryin cost
12*) Hi&en an E45 model wit, s,ortaes in w,ic, annual demand is #233 units+ 1oAB1/3+
s
AB20+ w,at is t,e annual orderin costC
A) 2"11.3:
9) 130:.3*
1) 1*00.00
D) 2:/.01
E) #:0."#
Answer: 1
Diff: 2 Pae !ef: "0";"08
'ey words: E45 model wit, s,ortaes+ t,e annual orderin cost
20
-,e manaer of t,e 5uic= Stop 1orner 1on&enience Store Ew,ic, is open */3 days per year)
sells four cases of Stein soda eac, day E1+##3 cases per year). 4rder costs are B8.33 per order.
-,e lead time for an order is t,ree days. Annual ,oldin costs are e6ual to B0"./3 per case.
12#) If t,e manaer orders 1/ cases eac, time s,e placed an order+ w,at is t,e a&erae in&entory
le&elC
A) # cases
9) 8 cases
1) 12 cases
D) 23 cases
E) 1/ cases
Answer: 9
120) If t,e manaer orders 1/ cases eac, time s,e placed an order+ ,ow many orders would s,e
place in a yearC
A) 13
9) 22.0
1) 03
D) "2
E) :3
Answer: E
12/) I,at is t,e optimal order 6uantity for Stein sodaC
A) # cases
9) 8 cases
1) 12 cases
D) 23 cases
E) 1/ cases
Answer: D
2/
12") I,at is t,e reorder point for Stein sodaC
A) # cases
9) 8 cases
1) 12 cases
D) 23 cases
E) 1/ cases
Answer: 1
128) If t,e daily demand is 03 and t,e lead time in days is #+ w,at is t,e reorder pointC
A) 233
9) 223
1) 2#3
D) 2/3
E) *33
Answer: A
12:) If t,e daily demand is #3 and t,e le&el time in days is #+ w,at is t,e reorder pointC
A) 123
9) 1#3
1) 1/3
D) 183
E) 233
Answer: 1
1*3) If t,e daily demand is 13 and t,e le&el time in days is 8+ w,at is t,e reorder pointC
A) 03
9) /3
1) "3
D) 83
E) :3
Answer: D
2"
1*1) If a&erae demand for an in&entory item is 233 units per day+ lead time is * days+ and safety
stoc= is 133 units+ w,at is t,e reorder pointC
A) *33
9) 033
1) /33
D) "33
E) 833
Answer: D
1*2) !u(y owns a small cafM and uses a linen supplier for ,er ta(leclot,s. I,ene&er s,e needs
more ta(leclot,s+ s,e calls t,e supplier. S,e uses an a&erae of 12 ta(leclot,s a day wit, a
standard de&iation of * ta(leclot,s. Lead time is a constant 2 days. If !u(y is willin to accept a
0> stoc=out ris=+ w,at is t,e reorder point+ rounded to t,e nearest ta(leclot,C Assume demand is
normally distri(uted.
A) 28
9) *1
1) *#
D) #2
Answer: 9
1**) -,e ser&ice le&el is t,e pro(a(ility t,at
A) t,e in&entory will meet demand
9) t,e in&entory a&aila(le durin lead time will meet demand
1) t,e in&entory a&aila(le durin lead time will not meet demand
D) t,e in&entory will not meet demand
Answer: 9
28
1*#) I,at ser&ice le&el results in 7ero safety stoc= in reorder point calculationsC
A) 3>
9) **>
1) 03>
D) 133>
E) 83>
Answer: 1
1*0) -,e ?????????? is t,e pro(a(ility t,at t,e in&entory a&aila(le durin lead time will meet
demand.
A) ser&ice le&el
9) in&entory le&el
1) re&iew period
D) reorder point
E) ma)imum in&entory le&el
Answer: A
1*/) If annual demand e6uals 1333 units+ t,e num(er of wor=in days per year is 203+ 1oAB*33
per order and 1cAB* per unit+ ,ow many days are (etween orders in t,e (asic E45 modelC
A) 130
9) 113
1) 112
D) 110
E) 123
Answer: 1
2:
1*") Annual demand for a paper(ac= dictionary at a (oo=store is 1233 units. -,e order cost is
B*03 and t,e carryin cost is B/ per unit per year. -,e num(er of wor=in days per year is */0.
I,at is t,e reorder pointC Assume t,at t,e (asic E45 model is applica(le.
A) 2:.2
9) 2:.#
1) 2:./
D) 2:.8
E) *3.1
Answer: 1
Diff: * Pae !ef: "/"
1*8) As ser&ice le&el increases+ e)pected num(er of stoc= outs ?????????? and safety stoc=
??????????.
A) increase+ increases
9) decrease+ decreases
1) decrease+ increases
D) increase+ decreases
Answer: 1
1*:) Addin 1.0 standard de&iations of safety stoc= to t,e a&erae demand durin lead time will
result in a ser&ice le&el of appro)imately:
A) 03>
9) /8.#>
1) 8#.1>
D) :*.*>
E) :".">
Answer: D
1#3) A periodic in&entory system
A) uses fi)ed order si7es at &aria(le time inter&als
9) normally re6uires a larer safety stoc=
1) cannot (e used if demand is &aria(le
D) is used to periodically manae in&entory
Answer: 9
$ain %eadin: 4rder 5uantity for a Periodic In&entory System
'ey words: periodic in&entory system+ fi)ed time period in&entory system
*3
1#1) Demand for a product is constant (ut lead time is &aria(le. -,e demand durin t,e lead
time is normally distri(uted wit, a mean of #3 and a standard de&iation of #. -,ey computed a
reorder point of #0 units Appro)imately w,at ser&ice le&el is (ein usedC
A) 80>
9) :3>
1) :0>
D) :8>
Answer: 9
1#2) -,e economic order 6uantity is especially sensiti&e to w,ic, of t,e followinC
A) orderin cost
9) carryin cost
1) annual demand
D) lead time
Answer: E
Diff: 2 Pae !ef: "0*
*1

Taylor Mgmt-Science10 Tif 16

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Introduction to Management Science, 10e (Taylor)

Chapter 16 Inventory Management

! L) ! sa"et# stock = 12(5) ! 21 = $0 ! 21 = 81.

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