Management MCQ: Management Chapter 12

Management Chapter 12

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An advantage of the fixed-period inventory system is that:

A) safety stock will be lower than it would be under a fixed-quantity inventory system.
B) there is no physical count of inventory items when an item is withdrawn.
C) no inventory records are required.
D) orders usually are for smaller order quantities.
E) the average inventory level is reduced.

Answer: B

Which of the following should be higher in P systems than Q systems?

A) lead time
B) demand
C) order size
D) order spacing
E) safety stock

Answer: E

Q is to systems as P is to systems.

A) fixed quantity, fixed period
B) variable demand, constant demand
C) variable lead time, variable demand
D) variable quantity, variable period
E) quality, price

Answer: A

Which of the following is a requirement of Q systems?

A) perpetual inventory system
B) constant order spacing
C) variable lead time
D) constant demand
E) all of the above

Answer: A

What is the difference between P and Q inventory systems?

A) order size
B) order spacing
C) maximum service level
D) lead time length
E) A and B

Answer: E

A disadvantage of the fixed-period inventory system is that:

A) it involves higher ordering costs than the fixed quantity inventory system.
B) additional inventory records are required.
C) the average inventory level is decreased.
D) since there is no count of inventory during the review period, a stockout is possible.
E) orders usually are for larger quantities.

Answer: D

The fixed-period inventory system requires more safety stock than a fixed-quantity system because:

A) a stockout can occur during the review period as well as during the lead time.
B) this model is used for products that have large standard deviations of demand.
C) this model is used for products that require very high service levels.
D) replenishment is not instantaneous.
E) setup costs and holding costs are large.

Answer: A

A bakery wants to determine how many trays of doughnuts it should prepare each day. Demand is normal with a mean of 5 trays and standard deviation of 1 tray. If the owner wants a service level of at least 95%, how many trays should he prepare (rounded to the nearest whole tray)? Assume doughnuts have no salvage value after the day is complete.

A) 5
B) 4
C) 6
D) 7
E) unable to determine with the above information

Answer: D

Service level is:

A) the probability of stocking out.
B) the probability of not stocking out.
C) something that should be minimized in retail.
D) calculated as the cost of a shortage divided by (the cost of shortage + the cost of overage) for single-period models.
E) B and D

Answer: E

Suppose that papers for a newspaper stand cost $0.40 and sell for $0.80. They currently have no salvage value. If the stand owner is able to find an outlet that would provide a salvage value of $0.10, what would be the increase in service level?

A) .5
B) 0
C) .07
D) 1
E) unable to determine given only the above information

Answer: C

A local club is selling Christmas trees and deciding how many to stock for the month of December. If demand is normally distributed with a mean of 100 and standard deviation of 20, trees have no salvage value at the end of the month, trees cost $20, and trees sell for $50 what is the service level?

A) .60
B) .20
C) .84
D) .40
E) unable to determine given the above information

Answer: A

The main trait of a single-period model is that:

A) inventory has limited value after a certain period of time.
B) it has the largest EOQ sizes.
C) the order quantity should usually equal the expected value of demand.
D) supply is limited.
E) the cost of a shortage cannot be determined accurately.

Answer: A

Which of the following items is mostly likely managed using a single-period order model?

A) Christmas trees
B) canned food at the grocery store
C) automobiles at a dealership
D) metal for a manufacturing process
E) gas sold to a gas station

Answer: A

In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. What is the standard deviation of demand during lead time?

A) 15 units
B) 100 units
C) 154 units
D) 500 units
E) 13,125 units

Answer: C

If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95 percent service requires how much safety stock?

A) 28 units
B) 30 units
C) 49 units
D) 59 units
E) 114 units

Answer: C

If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, a 90 percent service level will require how much safety stock?

A) 7 units
B) 10 units
C) 13 units
D) 16 units
E) 26 units

Answer: C

If demand is not uniform and constant, then stockout risks can be controlled by:

A) increasing the EOQ.
B) spreading annual demand over more frequent, but smaller, orders.
C) raising the selling price to reduce demand.
D) adding safety stock.
E) reducing the reorder point.

Answer: D

The proper quantity of safety stock is typically determined by:

A) using a single-period model.
B) carrying sufficient safety stock so as to eliminate all stockouts.
C) multiplying the EOQ by the desired service level.
D) setting the level of safety stock so that a given stockout risk is not exceeded.
E) minimizing total costs.

Answer: D

The purpose of safety stock is to:

A) replace failed units with good ones.
B) eliminate the possibility of a stockout.
C) eliminate the likelihood of a stockout due to erroneous inventory tally.
D) control the likelihood of a stockout due to variable demand and/or lead time.
E) protect the firm from a sudden decrease in demand.

Answer: D

Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be?

A) about 18
B) about 24
C) about 32
D) about 38
E) more than 40

Answer: E