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Exam 12: Inventory Management

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Question 41

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Safety stock in inventory systems depends only on the average demand during the lead time.

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Question 42

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In ABC analysis,"A" items are the most tightly controlled.

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Question 43

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When demand is constant and lead time is variable,the safety stock computation requires three inputs: the value of Z,________,and the standard deviation of lead time.

A newspaper boy is trying to perfect his business in order to maximize the money he can save for a new car.Daily paper sales are normally distributed,with a mean of 100 and standard deviation of 10.He sells papers for $0.50 and pays $0.30 for them.Unsold papers are trashed with no salvage value.How many papers should he order each day and what % of the time will he experience a stockout? Are there any drawbacks to the order size proposed and how could the boy address such issues?

If demand is not uniform and constant,then stockout risks can be controlled by:

What are the four functions of inventory?

What is cycle counting?

One advantage of cycle counting is that it maintains accurate inventory records.

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

Consider a product with a daily demand of 400 units,a setup cost per production run of $100,a monthly holding cost per unit of $2.00,and an annual production rate of 292,000 units.The firm operates and experiences demand 365 days per year.Suppose that management mistakenly used the basic EOQ model to calculate the batch size instead of using the POQ model.How much money per year has that mistake cost the company?

Perform an ABC analysis on the following set of products.

The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units,setup cost is $50,holding cost is $12 per unit per year,the daily demand rate is 10 and the daily production rate is 100.What is the production order quantity for this problem?

In a safety stock problem where both demand and lead time are variable,demand averages 150 units per day with a daily standard deviation of 16,and lead time averages 5 days with a standard deviation of 1 day.What is the standard deviation of demand during lead time?

Milk is stocked at the grocery store each week.At the end of the week unsold milk is reduced in price by 70% and always sells for this lower price instantly.If weekly demand for milk is normally distributed with a mean of 200 gallons and standard deviation of 25 gallons,find the price for which a fresh gallon of milk sells.Assume a service level of 95% and that the store purchases milk for $2 per gallon.

Given the following data: D=65,000 units per year,S = $120 per setup,P = $5 per unit,and I = 25% per year, (a)calculate the EOQ,and (b)calculate annual costs of holding and setup following EOQ behavior.

Which of the following statements about ABC analysis is FALSE?

Demand for gallons of milk (a perishable item)is normally distributed with a weekly mean of 50 and standard deviation of 15.How many additional gallons of milk must be stocked to increase the service level from 50% to 80%?

Which of the following statements about the basic EOQ model is FALSE?

All EXCEPT which of the following statements about ABC analysis are true?

In the simple EOQ model,if the carrying cost were to double,the EOQ would also double.