TRA Ch 20 exam review

18 December 2022
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question
C
answer
Firms keep supplies of inventory for which of the following reasons? A. To maintain dependence of operations B. To provide a feeling of security for the workforce C. To meet variation in product demand D. To hedge against wage increases E. In case the supplier changes the design
question
E
answer
Which of the following is not a reason to carry inventory? A. To provide a safeguard for variation in raw material delivery time B. To take advantage of economic purchase-order size C. To maintain independence of operations D. To meet variation in product demand E. To keep the stock out of the hands of competitors
question
B
answer
When developing inventory cost models, which of the following is not included as costs to place an order? A. Phone calls B. Taxes C. Clerical D. Calculating quantity to order E. Postage
question
A
answer
Which of the following is not included as an inventory holding cost? A. Annualized cost of materials B. Handling C. Insurance D. Pilferage E. Storage facilities
question
B
answer
Which of the following is usually included as an inventory holding cost? A. Order placing B. Breakage C. Typing up an order D. Quantity discounts E. Annualized cost of materials
question
A
answer
Which of the following is fixed-order quantity inventory model? A. Economic order quantity model B. The ABC model C. Periodic replenishment model D. Cycle counting model E. P model
question
C
answer
Which of the following is an assumption of the basic fixed-order quantity inventory model? A. Lead times are averaged B. Ordering costs are variable C. Price per unit of product is constant D. Back orders are allowed E. Stock-out costs are high
question
C
answer
Which of the following is the set of all cost components that make up the fixed-order quantity total annual cost (TC) function? A. Annual purchasing cost, annual ordering cost, fixed cost B. Annual holding cost, annual ordering cost, unit cost C. Annual holding cost, annual ordering cost, annual purchasing cost D. Annual lead time cost, annual holding cost, annual purchasing cost E. Annual unit cost, annual set up cost, annual purchasing cost
question
B
answer
Assuming no safety stock, what is the re-order point (R) given an average daily demand of 50 units, a lead time of 10 days and 625 units on hand? A. 550 B. 500 C. 715 D. 450 E. 475
question
B
answer
Assuming no safety stock, what is the reorder point (R) given an average daily demand of 78 units and a lead time of 3 days? A. 421 B. 234 C. 78 D. 26 E. 312
question
B
answer
If annual demand is 12,000 units, the ordering cost is $6 per order and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity using the fixed- order quantity model? A. 576 B. 240 C. 120.4 D. 60.56 E. 56.03
question
B
answer
If annual demand is 50,000 units, the ordering cost is $25 per order and the holding cost is $5 per unit per year, which of the following is the optimal order quantity using the fixed-order quantity model? A. 909 B. 707 C. 634 D. 500 E. 141
question
B
answer
If annual demand is 35,000 units, the ordering cost is $50 per order and the holding cost is $0.65 per unit per year, which of the following is the optimal order quantity using the fixed- order quantity model? A. 5,060 B. 2,320 C. 2,133 D. 2,004 E. 1,866
question
E
answer
Using the fixed-order quantity model, which of the following is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80 and a holding cost per unit per year of $4? A. $849 B. $1,200 C. $1,889 D. $2,267 E. $2,400
question
A
answer
A company is planning for its financing needs and uses the basic fixed-order quantity inventory model. Which of the following is the total cost (TC) of the inventory given an annual demand of 10,000, setup cost of $32, a holding cost per unit per year of $4, an EOQ of 400 units, and a cost per unit of inventory of $150? A. $1,501,600 B. $1,498,200 C. $500,687 D. $499,313 E. None of the above
question
B
answer
Using the probability approach to determine an inventory safety stock and wanting to be 95 percent sure of covering inventory demand, which of the following is the number of standard deviations necessary to have the 95 percent service probability assured? A. 1.28 B. 1.64 C. 1.96 D. 2.00 E. 2.18
question
E
answer
To take into consideration demand uncertainty in reorder point (R) calculations, what do we add to the product of the average daily demand and lead time in days when calculating the value of R? A. The product of average daily demand times a standard deviation of lead time. B. A "z" value times the lead time in days. C. The standard deviation of vendor lead time times the standard deviation of demand. D. The product of lead time in days times the standard deviation of lead time. E. The product of the standard deviation of demand variability and a "z" score relating to a specific service probability.
question
B
answer
If it takes a supplier four days to deliver an order once it has been placed and the standard deviation of daily demand is 10, which of the following is the standard deviation of usage during lead time? A. 10 B. 20 C. 40 D. 100 E. 400
question
B
answer
If it takes a supplier 25 days to deliver an order once it has been placed and the standard deviation of daily demand is 20, which of the following is the standard deviation of usage during lead time? A. 50 B. 100 C. 400 D. 1,000 E. 1,600
question
D
answer
A company wants to determine its reorder point (R). Demand is variable and they want to build a safety stock into R. If the average daily demand is 12, the lead time is 5 days, the desired "z" value is 1.96, and the standard deviation of usage during lead time is 3, which of the following is the desired value of R? A. About 6 B. About 16 C. About 61 D. About 66 E. About 79
question
C
answer
The Pareto principle is best applied to which of the following inventory systems? A. EOQ B. Fixed-time period C. ABC classification D. Fixed-order quantity E. Single-period ordering system
question
A
answer
Which of the following are the recommended percentage groupings of the ABC classifications of the dollar volume of products? A. A items get 15%, B items get 35%, and C items get 50% B. A items get 15%, B items get 45%, and C items get 40% C. A items get 25%, B items get 35%, and C items get 40% D. A items get 25%, B items get 15%, and C items get 60% E. A items get 20%, B items get 30%, and C items get 50%
question
D
answer
Using the ABC classification system for inventory, which of the following is a true statement? A. The "C" items are of moderate dollar volume B. You should allocate about 15 % of the dollar volume to "B" items C. The "A" items are of low dollar volume D. The "A" items are of high dollar volume E. Inexpensive and low usage items are classified as "C" no matter how critical
question
C
answer
Which of the following values for "z" should we use in as safety stock calculation if we want a service probability of 98%? A. 1.64 B. 1.96 C. 2.05 D. 2.30 E. None of the above
question
T
answer
An inventory system is a set of policies and controls that monitors levels of inventory and determines what levels should be maintained, when stock should be replenished, and how large orders should be.
question
T
answer
One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to specify when items should be ordered.
question
F
answer
One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to determine the level of quality to specify.
question
F
answer
In inventory models, high holding costs tend to favor high inventory levels.
question
T
answer
In inventory models, high holding costs tend to favor low inventory levels and frequent replenishment.
question
T
answer
If the cost to change from producing one product to producing another were zero the lot size would be very small.
question
F
answer
Shortage costs are precise and easy to measure.
question
F
answer
Dependent demand inventory levels are usually managed by calculations using calculus- driven, cost-minimizing models.
question
F
answer
The fixed-time period inventory system has a smaller average inventory than the fixed- order quantity system because it must also protect against stockouts during the review period when inventory is checked.
question
F
answer
The fixed-order quantity inventory model favors less expensive items because average inventory is lower.
question
T
answer
The fixed-order quantity inventory model is more appropriate for important items such as critical repair parts because there is closer monitoring and therefore quicker response to a potential stockout.
question
T
answer
The fixed-order quantity inventory model requires more time to maintain because every addition or withdrawal is logged.
question
T
answer
Fixed-order quantity inventory systems determine the reorder point, R and the order quantity, Q values.
question
T
answer
Safety stock can be defined as the amount of inventory carried in addition to the expected demand during lead time.
question
T
answer
Safety stock can be computed when using the fixed-order quantity inventory model by multiplying a "z" value representing the number of standard deviations to achieve a service level or probability by the standard deviation of periodic demand.
question
T
answer
Fixed-time period inventory models generate order quantities that vary from time period to time period, depending on the usage rate.
question
T
answer
In the fixed-time period model it is necessary to determine the inventory currently on hand to calculate the size of the order to place with a vendor.
question
T
answer
Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.