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Exam 17: Inventory Control

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Question 1

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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

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Question 2

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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.

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Question 3

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Fixed-time period inventory models are "time triggered."

Safety stock can be defined as the amount of inventory carried in addition to the expected demand.

When material is ordered from a vendor, which of the following is not a reason for delays in the order arriving on time?

Price-break models deal with the fact that the selling price of an item varies with the order size.

Shortage costs are precise and easy to measure.

One of the basic purposes of inventory analysis in manufacturing and stockkeeping services is to specify when items should be ordered.

If the cost to change from producing one product to producing another were zero the lot size would be very small.

Fixed-time period inventory models generate order quantities that vary from time period to time period, depending on the usage rate.

Which of the following is usually included as an inventory holding cost?

Cycle counting is a physical inventory-taking technique in which inventory is counted on a frequent basis rather than once or twice a year.

Which of the following is a perpetual system for inventory management?

Fixed-order quantity systems assume a random depletion of inventory, with less than an immediate order when a reorder point is reached.

Which of the following is not an assumption of the basic fixed-order quantity inventory model?

Fixed-order quantity inventory models are "event triggered."

The fixed-order quantity inventory model requires more time to maintain because every addition or withdrawal is logged.

In inventory models, high holding costs tend to favor high inventory levels.

The average cost of inventory in the United States is 20 to 25 percent of its value.

The costs associated with reduced inventory results in lower profits.