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Operations Management Ch 13
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Terms in this set (65)
One important use of inventories in manufacturing is to decouple operations through the use of work in process inventories.
T
2. The objective of inventory management is to minimize the cost of holding inventory.
F
3. A retail store that carries twice the inventory as its competitor will provide twice the customer service level.
F
4. The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.
T
5. The two main concerns of inventory control relate to the costs and the level of customer service.
T
6. To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and size of orders.
T
7. In the EOQ formula, holding costs under 10% are expressed as percentages, above 10% are expressed as annual unit costs.
F
8. DVD recorders would be an example of independent demand items.
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9. Reorder point models are primarily used for dependent demand items.
F
10. An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.
F
11. Decoupling operations applies to the railroad industry.
F
12. Interest, insurance, and opportunity costs are all associated with holding costs.
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13. The A-B-C approach involves classifying inventory items by unit cost, with expensive items classified as 'A' items and low cost items classified as 'C' items.
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14. An inventory buffer adds value and lowers cost in all supply chains.
F
15. In the A-B-C approach, C items typically represent about 15 percent of the number of items, but 60 percent of the dollar usage.
F
16. EOQ inventory models are basically concerned with the timing of orders.
F
17. The average inventory level is inversely related to order size.
F
18. The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.
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19. The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.
T
20. Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost.
T
21. Understocking an inventory item is a sure sign of inadequate inventory control.
F
22. Annual ordering cost is inversely related to order size.
T
23. The total cost curve is relatively flat near the EOQ.
T
24. Because price isn't a factor in the EOQ formula, quantity discounts won't affect EOQ calculations.
F
25. In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve.
F
26. In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.
F
27. ROP models indicate to managers the time between orders.
F
28. When to order can be calculated by the ROP and expressed as a quantity.
T
29. The rate of demand is an important factor in determining the ROP.
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30. The inventory value of the supply chain exceeds the inventory value of the organization's work in process inventory.
T
31. Safety stock is held because we anticipate future demand.
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32. Variability in demand and/or lead time can be compensated for by safety stock.
T
33. Solving quality problems can lead to lower inventory levels.
T
34. ROP models assume that demand during lead time is composed of a series of dependent daily demands.
F
35. Profit margins tend to be inversely related to inventory turns.
T
36. In the fixed-order interval model, the order size is the same for each order.
F
37. The fixed-order interval model requires a continuous monitoring of inventory levels.
F
38. Discrete stocking levels are used when an organization doesn't want visibility of inventory levels.
F
39. The fixed-order interval model requires a larger amount of safety stock than the ROP model for the same risk of a stockout.
T
40. The single-period model can be very helpful in determining when to order.
F
41. The single-period model can be very helpful in determining how much to order.
T
42. Monitoring inventory turns over time can be used as a measure of performance.
T
43. A single-period model would be used mainly by organizations going out of business.
F
44. The basic EOQ model ignores the purchasing cost.
T
45. When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of customer goodwill.
T
46. In the single-period model, the service level is the probability that demand will not exceed the stocking level in any period.
T
47. A quantity discount will lower the reorder point.
F
48. It is critical that the exact quantity calculated in the EOQ model be ordered.
F
49. Safety stock eliminates all stock outs.
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50. The calculation of safety stock requires knowledge of demand and lead time variability.
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51. The two basic issues in inventory are how much to order and when to order.
T
52. Cycle counting can be used in motorcycle inventory control.
T
53. Using the EOQ model, the higher an item's carrying costs, the more frequently it will be ordered.
T
54. The cycle time represents the time between reorder point and receipt of order.
F
55. The cost of placing an order is a function of order size.
F
56. All stock outs must be avoided.
F
57. In the basic EOQ model, annual holding cost is one-half of the total annual cost for all items purchased.
F
58. Quantity discounts are generally given for large number of orders.
F
59. The larger the number of orders placed, the larger the average level of inventory.
F
60. Which of the following is not one of the assumptions of the basic EOQ model?
quantity discounts are available
61. Which of the following interactions with vendors would potentially lead to inventory reductions?
reduced lead times
62. A non-linear cost related to order size is the cost of:
receiving
63. In a two-bin inventory system, the amount contained in the second bin is equal to the:
ROP
64. When carrying costs are stated as a percentage of unit price, the minimum points on the total cost curves:
line up
65. Dairy items, fresh fruit and newspapers are items that:
are subject to deterioration and spoilage
;