Name: 7.

It is used to identify a fixed order size that will minimize the

sum of the annual costs of holding inventory and ordering
True or False:(2 points each) inventory.
a. basic EOQ model
1. The inventory models described in this chapter relate primarily b. reorder point ordering
to what are referred to as independent-demand items, that is, c. fixed-order-interval model
items that are ready to be sold or used. d. the single-period model
2. A perpetual inventory system keeps track of removals from 8. It is used when orders must be placed at fixed time intervals
inventory on a continuous basis, so the system can provide (weekly, twice a month, etc.)
information on the current level of inventory for each item. a. basic EOQ model
3. The fixed-order-interval (FOI) model is used when orders must be b. reorder point ordering
placed at fixed time intervals (weekly, twice a month, etc.): c. fixed-order-interval model
4. Record keeping is important to have inventory records that are d. the single-period model
accurate and up-to-date, so that inventory decisions are based on 9. Model for ordering of perishables and other items with limited
correct information. Estimates of holding, ordering, and setup useful lives.
costs, as well as demand and lead times, should be reviewed a. basic EOQ model
periodically and updated when necessary. b. reorder point ordering
5. Variation reduction are demand driven, which means that goods are c. fixed-order-interval model
pulled through the system to match demand instead of being pushed d. the single-period model
through without a direct link to demand. 10. Price reductions for larger orders offered to customers to induce
them to buy in large quantities.
Multiple Choice:(1 point each) a. Quantity discounts
b. Trade discounts
1. It is a stock or store of goods.
c. Seasonal Discount
a. Inventory
d. Volume Discount
b. ROP
c. Demand Problem Solving:(5 points each)
d. Management
2. The following are functions of inventory except: 1. A toy manufacturer uses approximately 32,000 silicon chips
a. To meet anticipated customer demand annually. The chips are used at a steady rate during the 240 days
b. To smooth production requirements a year that the plant operates. Annual holding cost is $3 per
c. To decouple operations
chip, and ordering cost is $120. Determine the optimal order
d. To increase the risk of stockouts
quantity.
3. The average amount of inventory in a system is equal to the
product of the average demand rate and the average time a unit is 2. The motel replaces broken glasses at a rate of 25 per day. In the
in the system. past, this quantity has tended to vary normally and have a
a. Smith’s Law standard deviation of three glasses per day. Glasses are ordered
b. Little’s law from a Cleveland supplier. Lead time is normally distributed with
c. Aristotle Law an average of 10 days and a standard deviation of 2 days. What
d. Newton’s Law ROP should be used to achieve a service level of 95 percent?
4. Bar code printed on a label that has information about the item (Note: SL=95% requires z = +1.65)
to which it is attached. A lab orders a number of chemicals from the same supplier every
a. Two-bin system 30 days. Lead time is five days. The assistant manager of the lab
b. Point-of-sale (POS) systems must determine how much of one of these chemicals to order. A
c. Universal product code check of stock revealed that eleven 25-milliliter (ml) jars are
d. Radio frequency identification (RFID) tags
on hand. Daily usage of the chemical is approximately normal with
5. It is the amount paid to a vendor or supplier to buy the
inventory. It is typically the largest of all inventory costs. a mean of 15.2 ml per day and a standard deviation of 1.6 ml per
a. Inventory day. The desired service level for this chemical is 95 percent.
b. Purchase Cost How many jars should be ordered? (Note: SL=95% requires z =
c. Ordering cost +1.65)
d. Shortage cost
6. It classifies inventory items according to some measure of
importance, usually annual dollar value (i.e., dollar value per
unit multiplied by annual usage rate), and then allocates control
efforts accordingly.
a. A-B-C approach
b. Teaching approach
c. Sales approach
d. X-Y-Z approach