Question

7- Increasing the service level is not always good since the higher service level means higher EOQ.

True

False

9- In managing inventory, service level = z value – probability of stock out.

True

False

10 - The annual demand for a product is 1,000 units. The company orders 200 units each time an order is placed. The lead-time is 6 days, and the company has determined that 20 units should be held as a safety stock. There are 250 working days per year. What is the reorder point?

None of the above

60

120

25

30

11- Which of the following would NOT generally be a motive for a firm to hold inventories?

to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand

to decouple various parts of the production process

to minimize holding costs

to hedge against inflation

to take advantage of quantity discounts

Answer 1

7)True (since higher safety stock)

9)False (Service level=probability of no stock out)

10)Reorder point=(avg daily unit in sale*lead time)+safety stock = ((1000/250)*6)+20 =44

11)to minimize holding cost