978-0134741062 Test Bank Chapter 9 Part 3

subject Type Homework Help
subject Pages 9
subject Words 3548
subject Authors Larry P. Ritzman, Lee J. Krajewski, Manoj K. Malhotra

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7) The two-bin inventory system is a type of visual system.
8) Which one of the following statements concerning a continuous review system is best?
A) The inventory position (IP) of an item measures the item's ability to satisfy future demand, relying
only on the on-hand inventory.
B) An item's inventory position under a continuous review system increases by Q units as soon as an
order is received.
C) An item's on-hand inventory increases by Q units as soon as an order is placed.
D) Under a continuous review system, an item's inventory position corresponds to the on-hand inventory
unless there are backorders or one or more scheduled receipts.
9) Which one of the following descriptions best defines the cycle-service level as a measure of customer
service?
A) the preferred proportion of annual demand instantaneously filled from stock
B) the number of stockouts tolerated per year
C) the preferred proportion of days in the year when an item is in stock
D) the desired probability of not running out of stock in any one inventory cycle
10) Which one of the following statements is best?
A) The level of safety stock maintained decreases when the desired cycle-service level increases.
B) The level of safety stock maintained decreases when the standard deviation of demand during lead-
time increases.
C) When no safety stock is maintained, stockouts will occur during approximately 50% of the cycles.
D) The level of safety stock maintained is greater if mean absolute deviation (MAD) is used rather than
standard deviation in estimating forecast errors.
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11) Consider the following conditions for an item used in the Hess Company's manufacturing process:
On-hand inventory: 40 units
Open orders (scheduled receipts): 100 units
Backorders: 60 units
What is Hess's inventory position for this item?
A) 200 units
B) 140 units
C) 80 units
D) 40 units
12) Consider the following conditions for an item used in the Hess Company's manufacturing process:
On-hand inventory:
40 units
Open orders (scheduled receipts):
100 units
Backorders:
60 units
Reorder point:
100 units
Quantity per order:
50 units
Which of the following statements best describes Hess's situation regarding inventory replenishment?
A) No action is required, since a scheduled receipt is due to be delivered to Hess.
B) To cover its backorders, Hess should order two lots of 50 units.
C) Because it is incurring backorders, Hess should increase its reorder point.
D) Hess should place an order for 50 units, since the inventory position is less than the reorder point.
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13) Consider the following conditions for an item used in the Hess Company's manufacturing process:
On-hand inventory:
80 units
Open orders (scheduled receipts):
100 units
Backorders:
20 units
What is Hess's inventory position for this item?
A) 200 units
B) 160 units
C) 180 units
D) 80 units
14) Consider the following conditions for an item used in the Hess Company's manufacturing process:
On-hand inventory:
80 units
Open orders (scheduled receipts):
100 units
Backorders:
20 units
Reorder point:
150 units
Quantity per order:
50 units
Which of the following statements best describes Hess's situation regarding inventory replenishment?
A) No action is required, since Hess's inventory position is greater than the reorder point.
B) Hess should order one lot of 50 units to cover its backorders.
C) Because it is incurring backorders, Hess should increase its reorder point.
D) Hess should place an order for 50 units, since their inventory position is less than the reorder point.
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44
Copyright © 2019 Pearson Education, Inc.
Scenario 9.7
Cranium, Inc., purchases term papers from an overseas supplier under a continuous review system. The
average demand for a popular mode is 300 units a day with a standard deviation of 30 units a day. It
costs $60 to process each order and there is a five-day lead-time. The holding cost for a paper is $0.25 per
year and the company policy is to maintain a 98% service level. Cranium operates 200 days per year.
15) Use the information in Scenario 9.7. What is the reorder point R to satisfy a 98% cycle-service level?
A) less than or equal to 1,500 units
B) greater than 1,500 units but less than or equal to 1,600 units
C) greater than 1,600 units but less than or equal to 1,700 units
D) greater than 1,700 units
16) Use the information in Scenario 9.7. What service level does a reorder point of 1,524 imply?
A) less than or equal to 50%
B) greater than 50% but less than or equal to 55%
C) greater than 55% but less than or equal to 60%
D) greater than 60%
17) Use the information in Scenario 9.7. If lead-time increases by three days, what is the reorder point
needed to maintain a 98% service level?
A) less than or equal to 2,400 units
B) greater than 2,400 units but less than 2,500 units
C) greater than 2,500 units but less than 2,600 units
D) greater than 2,600 units
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18) Use the information in Scenario 9.7. What is the annual cost of holding the safety stock necessary to
maintain the 98% service level?
A) less than or equal to $30
B) greater than $30 but less than $40
C) greater than $40 but less than $50
D) greater than $50
19) Use the information in Scenario 9.7. What is the standard deviation of demand throughout the five-
day lead-time period?
A) about 45 units
B) about 67 units
C) about 103 units
D) about 200 units
20) Use the information in Scenario 9.7. What combination of changes in lead-time and service level
would result in exactly the same level of safety stock as indicated in the table?
A) Lead-time drops to 41 days and service level increases to 99%.
B) Lead-time increases to 18.52 days and service level drops to 92%.
C) Lead-time increases to 20.54 days and service level drops to 90%.
D) Lead-time drops to 3.5 days and service level increases to 99.54%.
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Scenario 9.8
A company operating under a continuous review system has an average demand of 50 units per week for
the item it produces. The standard deviation in weekly demand is 20 units. The lead-time for the item is
six weeks, and it costs the company $30 to process each order. The holding cost for each unit is $10 per
year. The company operates 52 weeks per year.
21) Use the information in Scenario 9.8. What is the desired safety stock level if the company has a policy
of maintaining a 90% cycle-service level?
A) less than or equal to 50 units
B) greater than 50 but less than or equal to 100 units
C) greater than 100 but less than or equal to 150 units
D) greater than 150 units
22) Use the information in Scenario 9.8. What is the reorder point if the company finally decides to
implement a 95 percent cycle-service level?
A) less than or equal to 300 units
B) greater than 300 but less than or equal to 325 units
C) greater than 325 but less than or equal to 350 units
D) greater than 350 units
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Scenario 9.10
The Dolly Llama Farm keeps an average of 50 of those funny creatures on hand and each consumes a
pound of grain a day, 365 days per year. Grain costs $12 for a 50 pound bag and it costs the farm $10 to
make a run to the feed store to pick up an order, regardless of order size. It takes the feed store four days
to acquire, mix, and bag the special blend of grains necessary to make the feed the Dolly Llama Farm
prefers. Storage costs for the feed runs 15% of the unit cost as the cost of money, loss due to critters, and
spoilage all add up.
23) Refer to Scenario 9.10. What should the reorder point be if demand and lead time are invariant and
the farm desires a 90% service level?
A) two bags
B) four bags
C) six bags
D) eight bags
24) Refer to Scenario 9.10. The actual usage for grain depends on which llamas show up at feeding time,
thus there is an average need for 50 pounds of grain each day with a standard deviation of five pounds.
The farm is willing to tolerate a 5% chance of running out of feed before they can get some more hauled
in. The llamas would prefer a 0% chance, but they don't get a vote. What reorder point achieves the farm's
objectives?
A) 4.32 bags
B) 5.16 bags
C) 6.28 bags
D) 7.80 bags
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25) Refer to Scenario 9.10. The actual usage for grain depends on which llamas show up at feeding time,
thus there is an average need for 50 pounds of grain each day with a standard deviation of five pounds.
In addition, there is some variability in how long it takes the feed store to whip up a batch of llama feed.
The standard deviation of the feed prep is one day. The farm is willing to tolerate a 2% chance of running
out of feed before they can get some more hauled in. The llamas would prefer a 0% chance, but they don't
get a vote. What reorder point achieves the farm's objectives?
A) three bags
B) four bags
C) five bags
D) six bags
26) Refer to Scenario 9.10. There is some variability in how long it takes the feed store to whip up a batch
of llama feed. The standard deviation of the feed prep is one day. The farm is willing to tolerate a 5%
chance of running out of feed before they can get some more hauled in. The llamas would prefer a 0%
chance, but they don't get a vote. What reorder point achieves the farm's objectives?
A) 246 pounds
B) 282 pounds
C) 304 pounds
D) 316 pounds
27) Refer to Scenario 9.10. The actual usage for grain depends on which llamas show up at feeding time,
thus there is an average need for 50 pounds of grain each day with a standard deviation of five pounds.
In addition, there is some variability in how long it takes the feed store to whip up a batch of llama feed.
The standard deviation of the feed prep is one day. The farm is willing to tolerate a 2% chance of running
out of feed before they can get some more hauled in. Which adjustment to their system would have the
greatest impact on the reorder point?
A) lower the standard deviation of the lead time to one half of a day
B) decrease the service level to 90%
C) increase the standard deviation of daily demand to 10 pounds
D) reduce the average daily demand to 45 pounds
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Scenario 9.11
Demand = 50,000 units/week
Standard deviation of weekly demand = 15,000 units
Average lead time = 8 weeks
Standard deviation of lead time: 3 weeks
Cycle-service level = 80%
A continuous review system is used to control inventory.
28) Use the information in Scenario 9.11. What is the standard deviation of demand during lead time?
A) greater than 0 but less than or equal to 100,000 units
B) greater than 100,000 units but less than or equal to 200,000 units
C) greater than 200,000 units but less than or equal to 300,000 units
D) greater than 300,000 units
29) Use the information in Scenario 9.11. What safety stock should the firm use for this product?
A) greater than 0 but less than or equal to 50,000 units
B) greater than 50,000 units but less than or equal to 100,000 units
C) greater than 100,000 units but less than or equal to 150,000 units
D) greater than 150,000 units but less than or equal to 200,000 units
E) greater than 200,000 units
30) Use the information in Scenario 9.11. What reorder point should the firm use for this product?
A) greater than 0 but less than or equal to 150,000 units
B) greater than 150,000 units but less than or equal to 300,000 units
C) greater than 300,000 units but less than or equal to 400,000 units
D) greater than 400,000 units but less than or equal to 500,000 units
E) greater than 500,000 units
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31) Use the information in Scenario 9.11. If the firm decides to increase its cycle-service level to 90%, what
is the new reorder point if all other parameters remain the same for this product?
A) greater than 550,000 units
B) greater than 400,000 units but less than or equal to 550,000 units
C) greater than 250,000 units but less than or equal to 400,000 units
D) greater than 150,000 units but less than or equal to 250,000 units
E) greater than 0 but less than or equal to 150,000 units
Scenario 9.12
Demand = 100,000 units/year
Number of days per year = 250 weeks
Standard deviation of weekly demand = 50 units
Average lead time = 5 days
Standard deviation of lead time: 2 days
Cycle-service level = 99%
A continuous review system is used to control inventory.
32) Use the information in Scenario 9.12. What is the standard deviation of demand during lead time?
A) greater than 0 but less than or equal to 500 units
B) greater than 500 units but less than or equal to 1,500 units
C) greater than 1,500 units but less than or equal to 2,500 units
D) greater than 2,500 units
33) Use the information in Scenario 9.12. What safety stock should the firm use for this product?
A) greater than 0 but less than or equal to 500 units
B) greater than 500 units but less than or equal to 1,500 units
C) greater than 1,500 units but less than or equal to 2,500 units
D) greater than 2,500 units
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34) Use the information in Scenario 9.12. If the firm decides to reduce its cycle-service level to 95%, what
is the new reorder point if all other parameters remain the same for this product?
A) greater than 4,500 units
B) greater than 3,500 units but less than or equal to 4,500 units
C) greater than 2,500 units but less than or equal to 3,500 units
D) greater than 1,500 units but less than or equal to 2,500 units
E) greater than 0 but less than or equal to 1,500 units
35) A(n) ________ system is a system designed to track the remaining inventory of an item each time a
withdrawal is made to determine whether to replenish the item.
36) The ________ is the measurement of an item's ability to satisfy future demand.
37) ________ are orders that have been placed but not yet received.
38) The ________ is the predetermined minimum level that an inventory position must reach before a
fixed quantity (Q) is ordered.

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