Question

which of the following is NOT true regarding inventory cost behavior as the replenishment quantity increases?

A. ordering cost decreases

B. Order cost increases

C. the # of exposures to stockout decrease

D. the holding cost increases

E. stockout cost decreases

Which of the following is true regarding manufacturing organizations' use of inventory?

A. A firm that experiences highly seasonal demand, yet produces at a constant rate, uses inventory to absorb the swings in demand.

B. A firm Amy experience constant demand, yet have seasonal production.

C. Consolidation of items stored will typically yield more favorable transportation rates.

D. warehousing and material handling can contribute significantly to distribution costs.

E. All of the above

The Newsboy Problem is:

A. a system with repetitive order quantities and instantaneous replenishment.

B. suitable for products with long life cycles

C. a system with repetitive order quantities and non-instantaneous replenishment

D. Suitable for products with a short life cycle or one-time order

Which of the following is a reason to hold inventory?

A. increase costs due to economies of scale in production

B. increase costs in purchasing and transportation

C. increase customer service

D. increase uncertainties in demand and lead times

E. none of the above

For Push vs. Pull inventory control, which of the following is true?

A. a pull system tends to optimize efficiency of the whole supply chain

B. a push system is controlled by the multiple warehouses that receive goods from a single plant

C.A pull system optimizes the warehouses but does not necessarily optimize the whole supply chain

D. A push system will always result in more inventory than a pull system

E. all of the above

Answer 1

1. B

If replenishment quantity increases, it will lead to higher inventory. As a result holding cost will go up and number of orders will go down reducing the ordering cost. Also, chance of stockout will decrease. But, order cost will not increase

1. E

In case of constant production rate, inventory is used for seasonal demand fluctuation. The production also can be done in advance and use to meet constant demand in case of high operational cost and output rate being higher than demand rate. Warehousing and material handling are significant components of distribution cost

1. D

The newsboy or newsvendor problem is suitable for products which are to be used one time as after a period the salvage value is very low. Like in case of newspaper, it can be used on the same day else it becomes of little value

1. C

The inventory is beneficial to increase customer service as material is available to service as required. It helps to meet uncertain demand and fluctuation

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