Mktg 372 chapter 12 – Flashcards
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What does WIP stand for
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Work in Process
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What are purchased items or extracted materials that will be transformed into components or products called
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raw materials inventory
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Hand tools, lubricants, and cleaning supplies are usually examples of what?
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MRO inventory
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Finished goods in transit to the customer are called what?
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distribution inventory
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Which inventory function specifically is designed to allow the company to maintain a level of production strategy
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anticipation inventory
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Which inventory function provides a cushion against unexpected supply shortage?
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speculative inventory
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Which inventory function helps firms garner quantity discounts
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lot size inventory
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Which of the following inventory functions does not involve end products sold to customers
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MRO inventory
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Which is the primary inventory function that is activated after coupons are distributed to customers?
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anticipation inventory
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Which inventory function provides a hedge against inflation
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speculative inventory
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Which inventory function exists between the manufacturing plant and the distribution plant?
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transportation inventory
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Which of the following allow you to calculate the average amount of the inventory in transit
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ATI-(365*t)/d
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In inventory management, when discussing customer service we mean:
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whether the product is available when the customer wants it
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Percentage of orders shipped on schedule is a good measure of finished goods customers service if:
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all orders and customers have similar value
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Percentage of line items shipped on schedule recognizes that:
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not all orders are equal but fails to take into acct the dollar values of orders
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What is the formula for inventory turnover?
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annual COGS/average inventory in dollars
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Companies can achieve cost efficient operations by using which of the following inventory approaches
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inventory building to leverage reduced setup costs
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If a company carries 13 weeks of supply, what is the inventory turnover?
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52 weeks/13 weeks =4
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The formula to calculate a week's of supply is
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week of supply=average on hand in dollars/average weekly usage in dollars
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Which of the following is NOT affected by decisions about how much inventory to hold?
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depreciation
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All of the following affect holding costs except
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setup cost
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If inventory records fail to accurately reflect the quantity of materials available, all except which of the following may occur
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continuous operations
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In the service industry it is considered good performance when a company has an inventory loss of only
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1%
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a SKU is a ___________________ at a ____________________ geographic location
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specific item, particular
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In a periodic review inventory system, how many units are ordered?
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Target inventory level- on hand balance
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Which of the following is an assumption of the basic EOQ model
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quantity discounts are not considered
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Which of the following is an assumption of the basic EOQ model
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lead time is known and constant
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Which of the following is an assumption of the basic EOQ model
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demand is known and constant
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Which of the following is an assumption of the basic EOQ model
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orders arrive at once (in one lot)
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What costs are considered in the basic EOQ model
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annual ordering costs+annual holding costs
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If the annual demand is 24000 units, orders are placed every .5 months, and the cost to place an orders if $50, what is the annual ordering cost?
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24x$50 =$1200
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If annual demand is 48000 units, orders are placed in quantities of 2000 units at a time, and the cost to place an order is $80, what is the annual ordering cost
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(48000/2000)*80 =$1920
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For the basic EOQ model, what is the formula for the total annual cost
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(D/Q)S+(Q/2)H
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For the basic EOQ model, how many units should be ordered each time an order is placed
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square root(2DS/H)
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If the EOQ is ordered, which of the following is true
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annual ordering cost is equal to annual holding cost
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if the EOQ is ordered, which of the following represents the total annual cost of ordering the holding
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square root (2DSH)
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What does EPQ stand for
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economic production quantity
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Which basic EOQ assumption does the EPQ model relax
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orders arrive at once
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ifthe costs (S and H) and demands (D) are the same, which of the following is NOT true with regard to the EPQ model as compared to the EOQ model
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both models use the same formula to compute annual holding cost
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If the costs (S and H) and demands (D) are the same, which of the follwoing is not true with regard to the EPQ model as compared to the EOQ model?
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the two models use different formulas to computer annual holding cost
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If the costs (S and H) and demands (D) are the same, which of the follwoing is not true with regard to the EPQ model as compared to the EOQ model?
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the two models use different formulas to compute annual ordering costs
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If the costs (S and H) and demands (D) are the same, which of the follwoing is not true with regard to the EPQ model as compared to the EOQ model?
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the inventory depletion rate is not the same for both models
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if the costs (S and H) and demands (D) are the same, which of the following is true with regard to the EPQ model as compared to the EOQ model
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the lot size under the EPQ model is bigger than under the EOQ model
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A (an) _________ inventory record provides an up to date inventory balance by recording all inventory transactions as they happen
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perptual
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in the two bin system, what does the quantity in the second bin represent
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demand during replenishment lead time
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Which of the following statements is NOT true
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using perpetual inventory records results in different order quantities than using a two bin system
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what costs are considered in the quantity discount model
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annual purchasing costs+ annual holding costs+ annual ordering costs
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How can the EPQ model be economically reconciled with just in time production
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decrease ordering cost
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______________ is the probability that demand during lead time will NOT exceed on hand inventory
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order cycle service level
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The formula for calculating safety stock when an estimate of demand during lead time and its standard deviation are known as
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SS+z*meandl
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Which of the following is used in determining the order quantity in the periodic review system
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target inventory level
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Under a periodic review system, enough inventory must be carried to protect against stockout for the ___________
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replenishment lead time plus the review period
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What are the two major decisions to be made when using the periodic review system
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the time between orders and the target inventory level
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What are two logical ways in which to base the time between orders in a periodic review system
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convenience or EOQ calculations
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What does TBO stand for
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time between orders
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In a periodic review system, if you are basing your time between orders on the EOQ, what should be its length in weeks
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EOW/average weekly demand
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Consider a periodic review inventory with a lead time of two weeks and a review period of seven weeks. If the standard deviation of weekly demand is 200 and the desired cycle service level is 86%, what should the safety stock equal
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R=dL+SS 648
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Consider a periodic review system with a lead time of two weeks and a review period of seven weeks. If the average demand per week is 1000 units and 300 units of safety stock are held, what should the target inventory level be?
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TI=d(RP+L)+SS 9300
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Consider the periodic system. The target inventory level is 1000 units. It is time to review the item, and the on hand inventory level is 200 units. How many units should be ordered?
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TI=d(RP+L)+SS 800
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What implies that about 20% of the inventory items will account for about 80% of the inventory value?
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Pareto's law
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The ranking in ABC inventory analysis is based on what?
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annual dollar usage
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ABC inventory assumes that a company's inventory is ____ equal and ______ the same level of ________
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not, does not need, control
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Which of the following statement is true
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periodic counting generally counts every item in stock, whereas annually cycle counting generally does not daily
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Mary's Flower Boutique needs to ship finished goods from its manufacturing facility to its distribution warehouse. Annual demand for the Flower Boutique is 2000 flowers. Flower Boutique can ship the flowers via regular parcel service (3 days transit time), premium parcel service (1 day transit time), or via public carrier (5 days transit time). What is the average annual transportation inventory for each alternative
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ATI(regular service)= 3(2400)/365=19.7 ATI(premium)=1(2400)/365=6.6 ATI(public service)=5(2400)/365=32.9
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For product W, a firm has an annual holding cost percentage of 20%, an ordering cost of $110 per order, and annual demand of 15000 units. The following price schedule applies to the firm's purchases. What is the optimal order quantity
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812
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A computer company has an annual demand of 20,000. They want to determine EOQ for circuit boards which have an annual holding cost of $10/unit, and an ordering cost(S) of $75. The purchasing lead time is 5 days. What is the TC and the reorder point (R)?
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square root of 2(20,000)(75)/10=548 R=20,000/250 daysx 5 days= 400 units TC=(20000/548x75)+(548/2x10)= $5477 400 units, $5477
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What is the formula for calculating the max inventory level
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Imax=Q(1-d/p)
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How can both the JIT and EOQ inventory theories effectively be reconciled
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by considering the setup cost as a variable instead of a parameter
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What is the formula for calculating the average transportation inventory (ATI)
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ATI= tD/365
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When is the basic EOQ model a special case of the EPQ model
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the production rate per day approaches infinity
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Consider the basic EOQ model. If annual demand doubles, what happens to the total annual setup and holding cost?
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it increases by 41.42%
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Which of the following is NOT an identified reason why manufacturing firms do not use optimal EOQ order quanities
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what the sales price is
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Which of the following is not one of the six ways to use inventory
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JIT iventory
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the inventory objective of customer service is measured by any of the following EXCEPT
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weeks of supply
