MNET 416

QUIZ # 4. Time allowed 30 min.

True or False:

1. World-class companies are striving to be more inventory-lean [true]

2. The types of inventories companies hold include raw materials, work-in-process, and finished goods. [true]

3. Dependent demand inventories consists of items whose demand depends on the demands for other items held in inventory [true]

4. The Economic Order Quantity (EOQ) occurs when the total annual stocking costs are at minimum [true]

5. If the order quantity Q is increased in a fixed order quantity inventory system, the annual carrying cost decreases. [false]

6. In a fixed order quantity inventory system the intervals between two consecutive orders are constant [false]

7. The fixed order quantity inventory system uses a perpetual inventory accounting system. [true]

8. The fixed order period inventory control system uses a periodic inventory accounting system [true]

9. If everything else is the same, in the EOQ with gradual deliveries model the EOQ and maximum inventory are greater than the basic EOQ model. [false]

10. If D is the annual demand and Q is the order quantity, then the number of orders over the year is D/Q. [true]

11. A service level is the probability that a customer will place an order in a given week, everything else being equal. [false]

12. In EOQ with gradual delivery, number days it will take to supply the material is Q/p, where Q is the ordered quantity and p is the supply rate per day. [true]

13. In EOQ with gradual delivery, the average inventory level is (Q/2)*(p-d)/p [true]

14. The ABC method of inventory classification is based on the idea that a small percentage of items represents the majority of inventory value. [true]

Multiple choice questions:

15. What fundamental issue underline all inventory planning? A. how to balance ordering costs and shortage costs b. how much to order of each material c. when to place the orders d. both b and c e. all of the above

16. The “two-bin system” is used to determine: a. production rates b. production schedule c. EDDLT d. quality of raw materials e. inventory replenishment

17. The variation in demand during lead time (DDLT) for a material is due to: a. annual demand for the material being subject to variation b. uncertainty of stock-outs c. the lead time to receive an order being known d. variation in safety stock level e. daily demand for the material is subject to variation

18. Management sets a service level at 95% for a material. This means that: a. 95% of all customer orders for the material will be filled b. 5% of all customer orders will be filled c. there is a 5% probability of stock-out on the material d. management is 95% confident in operations e. none of the above.