POM Ch. 5 INVENTORY CONTROL

When developing inventory cost models, which of the following are not included as costs to place an order?

• Phone calls

• Taxes

• Clerical

• Calculating quantity to order

Which of the following is not included as an inventory holding cost?

• Annualized cost of materials

• Handling

• Insurance

• Pilferage

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

• Ordering or setup costs are constant

• Inventory holding cost is based on average inventory

• Diminishing returns to scale of holding inventory

• Lead time is constant

If annual demand is 12,000 units, the ordering cost is $6 per order and the holding cost is $2.50 per unit per year, which of the following is the optimal order quantity?

• 576

• 240

• 120.4

• 60.56

Using the economic order quantity model, which of the following is the total ordering cost of inventory given an annual demand of 36,000 units, a cost per order of $80 and a holding cost pe unit per year of $4?

• $849

• $1,200

• $1,889

• $2,400

The Pareto principle is best applied to which of the following inventory systems?

• EOQ

• Fixed-time period

• ABC classification

• Fixed-order quantity

Using the ABC classification system for inventory, which of the following is a true statement?

• The “C” items are of moderate dollar value

• You should allocate about 15 % of the dollar volume to “B” items

• The “A” items are of low dollar value

• The “A” items are of high dollar value

Which one of the following statements is best?

• A P system requires more safety stock than a Q system

• A P system lends itself more to quantity discounts than does a Q system.

• A P system requires more administrative control and computer support than does a Q system.

• In a periodic review system, the value of Q is kept the same from one cycle to another.

Sark Incorporated is out of stock for a key item, which has a backorder of 200 units. An open order of 750 units is scheduled for arrival on the following Monday. What is the current inventory position at Sark?

• Less than or equal to 0 units

• Greater than 0 but less than or equal to 500 units

• Greater than 500 but less than or equal to 750 units

• Greater than 750 units

In ABC analysis A items require

• No safety stock

• Low safety stock

• Moderate safety stock

• High safety stock