Question

QUESTION 1

1. Which of the following statements is TRUE?

   	a.	The average amount of safety stock depends on the size of orders placed with the supplier.
   	b.	The average amount of safety stock depends on the frequency in which orders are placed with the supplier.
   	c.	Cycle stock is the amount of inventory on hand when an order from the supplier is placed.
   	d.	Safety stock is the expected amount of inventory on hand when an order arrives from the supplier.
   	e.	All four answer choices are TRUE

1 points   

QUESTION 2

1. Consider an oilfield service company ( OSC ) that stocks a specific type of compressor, which they source from an American supplier. Since this compressor is the only product that OSC sources from that specific supplier, and given relatively steady demand of 2,000 compressors throughout the year, OSC uses a Continuous Review (Q) system for managing the inventory of this compressor. Orders to replenish stock requires administrative and other work that is estimated to be $40 per order. The compressors are purchased from the supplier for $325 each. It is estimated that annual inventory holding costs are 27% of the value of the item. The time from when an order is placed with the supplier until it arrives averages three weeks (including time to clear customs).

   What is the order quantity that OSC should use for these compressors if they wish to minimize total annual holding and ordering costs?

   	a.	115
   	b.	44
   	c.	22
   	d.	52
   	e.	43

1 points   

QUESTION 3

1. The Cheezy-Pretz corporation manufactures and distributes cheese-coated pretzels. They purchase their cheese, which come from a specific supplier in 10 kg packages, in batches of 500 kg (i.e. they currently order in lots of 50 packages at a time). This amounts to approximately an order every month, since annual demand is 600 packages. Each package costs Cheezy-Pretz $7, and they estimate that holding a package in inventory costs $1.75 per year. Further, they have studied their ordering process and estimate that it costs them $35 to place an order. They have been told that if they find the optimal order quantity, they could save money on annual ordering plus holding costs. Cheezy-Pretz would like to know how much they would save per year in ordering plus holding costs if they used the EOQ rather than their current order quantity of 50 packages at a time.

   	a.	<$100 per year
   	b.	>100 per year but < $150 per year
   	c.	>$150 per year but < $200 per year
   	d.	>$200 per year but < $250 per year
   	e.	>$300 per year

QUESTION 4

1. A night club that operates seven days a week uses a periodic review system where they check the stock of beer and liquor every Tuesday (at noon) and place an order that arrives on Thursday (at noon). They have found that demand for Silk beer ( smooth as silk ) averages 4.5 units per day with a standard deviation of 1.75 units. In any given week, they would like to be 95% sure that they don’ t run out of Silk beer before their order arrives. On Tuesday, if they have 16 units of beer on hand, how many units should they order?

   	a.	38
   	b.	39
   	c.	34
   	d.	23
   	e.	43

1 points   

QUESTION 5

1. The QRS Restaurant Supplier Co. is a wholesaler/distributor that supplies clients in the restaurant business with fresh perishables (e.g., produce) as well as equipment and supplies. One product that QRS provides to their customers (restaurants) is plastic stretch-wrap that comes in special extra-large rolls. QRS sells rolls from their inventory to their customers, and the inventory at the QRS warehouse is replenished by the stretch-wrap manufacturer in Ann Arbor, MI.

   QRS collected the following specific inventory-related data :
   
   Weekly demand (in rolls): average 42/week; standard deviation 16/week
   
   Annual demand (in rolls; assuming that demand occurs 52 weeks/year): 2,184
   
   Purchase price (QRS pays manufacturer) per roll: $54 Canadian
   
   QRS cost to place order with manufacturer: $35 per order (includes administrative costs to issue purchase order, invoice payment, etc.)
   
   XYZ annual cost to hold inventory: 23% of value
   
   Lead time for replenishment from manufacturer: three weeks
   
   Your Question: QRS currently places a replenishment order for rolls when their inventory position reaches 160 units. What cycle-service level does this imply?

   	a.	98.9%
   	b.	73.9%
   	c.	89.0%
   	d.	96.4%
   	e.	92.9%

QUESTION 6

1. Which of the following statements is TRUE?:

   	a.	A Periodic Review system requires less safety stock than a Continuous Review system.
   	b.	Over the long run, a Periodic Review (P) system and a Continuous Review (Q) system will generally have the same average order frequency and order size as each other (assuming that the manager aims to minimize the total of annual holding and ordering costs in both of the cases).
   	c.	In a Periodic Review system, order quantities tend to remain the same from order to order, while in a Continuous Review system, order quantities tend to vary from order to order.
   	d.	A Periodic Review system requires a computerized record-keeping system to maintain constant awareness of inventory position.
   	e.	All four answer choices are TRUE

QUESTION 7

1. A gas processing plant has a vat of important industrial lubricant for the machinery at the plant. Since an external supplier is responsible for maintaining the inventory of the lubricant, the supplier has a sensor set up on the vat that sends them a notification (by text message) as soon as the vat reaches a specific level of remaining volume. The demand for the lubricant averages 19 litres per day (with a standard deviation of 4.5), and the supplier requires a four-day lead time to refill the vat (assume it is exactly four days with no variability). If the supplier wishes to promise a 97.5% cycle-service level, at what volume should the sensor be set to contact the supplier? (Please double-check your answer, even if it shows up as one of the choices below.)

   	a.	76
   	b.	112
   	c.	94
   	d.	85

Answer 1