Operations Management Quiz #8

Items sold to a firm's customers are called:

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Repeatability is an undesirable feature of some orders because they must be repeated until the order is filled correctly.

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A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled later.

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One of the secondary levers for reducing pipeline inventory is to:

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Inventory management is the planning and controlling of inventories in order to meet the competitive priorities of the organization.

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As the annual demand increases, the EOQ also increases.

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One component of the ordering cost of inventory is shrinkage.

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Which of the following is NOT a lever for reducing cycle inventories?

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Considering the EOQ model, smaller lots are justified when holding costs are decreased.

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One component of the holding cost of inventory is interest.

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A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

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A quantity discount is attractive because there is a drop in the price per unit when the order is sufficiently large.

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Reducing setup costs will increase the pressure to keep larger inventories.

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EOQ should be used if you use a make-to-order strategy and the customer specifies the entire order be delivered in one shipment.

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Scenario 9.2 The Burdell Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter", is used for the two most expensive of Burdell's four models, and has an estimated annual demand of 300 units. Burdell estimates the cost to place an order is $40, and the holding cost for each assembly is $60 per year. The company operates 250 days per year. Use the information in Scenario 9.2. What are the annual inventory holding costs if Burdell orders using the EOQ quantity?

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Scenario 9.1 The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. Use the information in Scenario 9.1. What are the annual inventory holding costs if Talbot orders using the EOQ quantity?

Question 17 options:

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Scenario 9.1 The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. The company operates 250 days per year. Use the information in Scenario 9.1. What is the economic order quantity for the XO-01?

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Use the following to answer the questions below. Shipments of Product A from a distribution center to a retailer are made in lots of 350. The retailer's average demand for A is 75 units per week. Lead time from distributor to retailer is 3 weeks. The retailer pays for the shipments when they leave the distributor. The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350. Refer to the instruction above. With the change in purchased quantities, the average cycle inventory will:

Question 19 options:

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Scenario 9.2 The Burdell Company is a small manufacturing company that uses gear assemblies to produce four different models of mountain bikes. One of these gear assemblies, the "Smooth Shifter", is used for the two most expensive of Burdell's four models, and has an estimated annual demand of 300 units. Burdell estimates the cost to place an order is $40, and the holding cost for each assembly is $60 per year. The company operates 250 days per year. Use the information in Scenario 9.2. The purchasing manager decides that, in order to save purchasing time, orders for the Smooth Shifter will be placed once a month, or twelve times per year. How much does this approach cost Burdell in additional annual holding and ordering costs (instead of Burdell ordering using the EOQ quantity)?

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