Operations Management Study Set 5

Statistics

Quiz 12 :

Inventory Management

Quiz 12 :

Inventory Management

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To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: when to order and how much to order.
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True

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The average inventory level is inversely related to order size.
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False

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Understocking an inventory item is a sure sign of inadequate inventory control.
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False

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The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.
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One important use of inventories in manufacturing is to decouple operations through the use of work-in-process inventories.
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DVD recorders would be an example of independent-demand items.
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A retail store that carries twice as much inventory as its competitor will provide twice the customer service level.
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An inventory buffer adds value and lowers cost in all supply chains.
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The A-B-C approach involves classifying inventory items based on their name.
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The objective of inventory management is to minimize the cost of holding inventory.
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Reorder point models are primarily used for dependent-demand items.
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The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases.
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The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.
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Interest, insurance, and opportunity costs are all associated with holding costs.
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Decoupling operations means to break the linkage between two sequential operations.
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In the A-B-C approach, C items typically represent about 15 percent of the number of items, but 60 percent of the dollar usage.
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An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier.
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In the EOQ formula, holding costs under 10 percent are expressed as percentages, above 10 percent are expressed as annual unit costs.
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Carrying cost is a function of order size; the larger the order quantity, the higher the inventory carrying cost.
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EOQ inventory models are basically concerned with the timing of orders.
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