Inventory Management

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Question 1

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

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Question 2

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

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Question 3

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

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Question 4

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The overall objective of inventory management is to achieve satisfactory levels of customer service while keeping inventory costs reasonable.

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Question 5

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To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds, two fundamental decisions must be made about inventory: when to order and how much to order.

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Question 6

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In the EOQ formula, holding costs under 10 percent are expressed as percentages, above 10 percent are expressed as annual unit costs.

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Question 7

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

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Question 8

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

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Question 9

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

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Question 10

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Decoupling operations means to break the linkage between two sequential operations.

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Question 11

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

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Question 12

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The A-B-C approach involves classifying inventory items based on their name.

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Question 13

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

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Question 14

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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.

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Question 15

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

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Question 16

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The average inventory level is inversely related to order size.

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Question 17

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

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Question 18

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The EOQ should be regarded as an approximate quantity rather than an exact quantity. Thus, rounding the calculated value is acceptable.

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Question 19

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

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Question 20

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

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