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1. One important use of inventories in manufacturing is to decouple operations through the use of work in process inventories. True False 2. The objective of inventory management is to minimize the cost of holding inventory. True False 3. A retail store that carries twice the inventory as its competitor will provide twice the customer service level. True False 4. The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable. True False 5. The two main concerns of inventory control relate to the costs and the level of customer service. True False 6. To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: the timing and size of orders. True False 7. In the EOQ formula, holding costs under 10% are expressed as percentages, above 10% are expressed as annual unit costs. True False 8. DVD recorders would be an example of independent demand items. True False 9. Reorder point models are primarily used for dependent demand items. True False 10. An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a supplier. True False 11. Decoupling operations applies to the railroad industry. True False 12. Interest, insurance, and opportunity costs are all associated with holding costs. True False 13. The A-B-C approach involves classifying inventory items by unit cost, with expensive items classi?ed as ‘A’ items and low cost items classi?ed as ‘C’ items. True False 14. An inventory buffer adds value and lowers cost in all supply chains. True False 15. 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. True False 16. EOQ inventory models are basically concerned with the timing of orders. True False 17. The average inventory level is inversely related to order size. True False 18. The average inventory level and the number of orders per year are inversely related: As one increases, the other decreases. True False 19. The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable. True False 20. Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost. True False 21. Understocking an inventory item is a sure sign of inadequate inventory control. True False 22. Annual ordering cost is inversely related to order size. True False 23. The total cost curve is relatively ?at near the EOQ. True False 24. Because price isn’t a factor in the EOQ formula, quantity discounts won’t affect EOQ calculations. True False 25. In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost curves will have the same EOQ for each curve. True False 26. In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve. True False 27. ROP models indicate to managers the time between orders. True False 28. When to order can be calculated by the ROP and expressed as a quantity. True False 29. The rate of demand is an important factor in determining the ROP. True False 30. The inventory value of the supply chain exceeds the inventory value of the organization’s work in process inventory. True False

1. One important use of inventories in manufacturing is to decouple operations through the use of work in process

inventories.

True False

 

2. The objective of inventory management is to minimize the cost of holding inventory.

True False

 

3. A retail store that carries twice the inventory as its competitor will provide twice the customer service level.

True False

 

4. The overall objective of inventory management is to achieve satisfactory levels of customer service while

keeping inventory costs reasonable.

True False

 

5. The two main concerns of inventory control relate to the costs and the level of customer service.

True False

 

6. To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two

fundamental decisions must be made about inventory: the timing and size of orders.

True False

 

7. In the EOQ formula, holding costs under 10% are expressed as percentages, above 10% are expressed as

annual unit costs.

True False

 

8. DVD recorders would be an example of independent demand items.

True False

 

9. Reorder point models are primarily used for dependent demand items.

True False

 

10. An example of inventory holding cost is the cost of moving goods to temporary storage after receipt from a

supplier.

True False

 

11. Decoupling operations applies to the railroad industry.

True False

 

12. Interest, insurance, and opportunity costs are all associated with holding costs.

True False

 

13. The A-B-C approach involves classifying inventory items by unit cost, with expensive items classi?ed as ‘A’

items and low cost items classi?ed as ‘C’ items.

True False

 

14. An inventory buffer adds value and lowers cost in all supply chains.

True False

 

15. 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.

True False

 

16. EOQ inventory models are basically concerned with the timing of orders.

True False

 

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

True False

 

18. The average inventory level and the number of orders per year are inversely related: As one increases, the

other decreases.

True False

 

19. The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the

calculated value is acceptable.

True False

 

20. Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost. True False

 

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

True False

 

22. Annual ordering cost is inversely related to order size.

True False

 

23. The total cost curve is relatively ?at near the EOQ.

True False

 

24. Because price isn’t a factor in the EOQ formula, quantity discounts won’t affect EOQ calculations.

True False

 

25. In the quantity discount model, if holding costs are given as a percentage of unit price, a graph of the total cost

curves will have the same EOQ for each curve.

True False

 

26. In the quantity discount model, the optimum quantity will always be found on the lowest total cost curve.

True False

 

27. ROP models indicate to managers the time between orders.

True False

 

28. When to order can be calculated by the ROP and expressed as a quantity.

True False

 

29. The rate of demand is an important factor in determining the ROP.

True False

 

30. The inventory value of the supply chain exceeds the inventory value of the organization’s work in process

inventory.

True False

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