Chapter 14 – Independent Demand Inventory
15-11
31. Primary reasons to hold inventory include all of the following EXCEPT
32. Inventory cost structures incorporate four types of costs. Which of the following is NOT
one of those four?
33. Correctly complete the following statements. Independent demand and dependent demand
differ in that
LO: 14.3
Topic: Independent versus Dependent Demand
Difficulty: 2 Moderate
AACSB: Reflective thinking
Bloom’s: Understand
Feedback: Finished goods are subject to independent market demand, while components are dependent on production orders for the final
product.
15-12
34. Which of the following statements about ABC inventory classification schemes is
FALSE?
35. Which of the following statements is INCORRECT regarding the EOQ model?
36. Which of the following statements about service level in a fixed order quantity inventory
system is FALSE?
LO: 14.5
Topic: Continuous Review System
Difficulty: 2 Moderate
AACSB: Reflective thinking
Bloom’s: Understand
Feedback: There is a highly nonlinear relationship between service level and inventory level.
15-14
40. If mean daily demand is 20 units, lead time is 7 days, the standard deviation of demand
during lead time is 12.0 units, and management has a preferred service level of 99.9% (z = 3),
the reorder (R) level for the item would be
41. If the standard deviation of lead time demand is 10 units, management has a preferred
service level of 99.9% (z = 3), and holding costs are $0.75 per unit per month, the annual cost
of holding safety stock for this product will approximate to
42. Which of the following statements concerning differences between continuous review (Q
systems) and periodic review (P systems) inventory systems is FALSE?
