Scribd
Upload
29 views3 pages

Inventory Model Questions

The document discusses the functions of inventory including buffering against demand uncertainties and protecting operations from sudden supply disruptions. It also discusses that inventory provides economies of scale. It then asks multiple choice questions about inventory concepts like supply lead time, raw materials as finished goods, and the basis for ABC classification.

Uploaded by

1800srv
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
29 views3 pages

Inventory Model Questions

The document discusses the functions of inventory including buffering against demand uncertainties and protecting operations from sudden supply disruptions. It also discusses that inventory provides economies of scale. It then asks multiple choice questions about inventory concepts like supply lead time, raw materials as finished goods, and the basis for ABC classification.

Uploaded by

1800srv
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Which of the following are true about the functions of inventory? Check all that applies.

1 / 1 point

Buffers against demand uncertainties.


Correct
Inventories help in matching demand and supply, and protects against demand fluctuations and
supply disruptions. In addition, inventory helps in bulk transportation and handling of products,
thereby providing economies of scale. However, excess inventory can often lead to product
obsolescence and does not protect against it. Therefore, all except option (d) is correct.

Protects operations from sudden supply disruptions.


Correct
Inventories help in matching demand and supply, and protects against demand fluctuations and
supply disruptions. In addition, inventory helps in bulk transportation and handling of products,
thereby providing economies of scale. However, excess inventory can often lead to product
obsolescence and does not protect against it. Therefore, all except option (d) is correct.

Provides economies of scale.

Correct
Inventories help in matching demand and supply, and protects against demand fluctuations and
supply disruptions. In addition, inventory helps in bulk transportation and handling of products,
thereby providing economies of scale. However, excess inventory can often lead to product
obsolescence and does not protect against it. Therefore, all except option (d) is correct.

Protects businesses against product obsolescence.


2.
Question 2
Supply lead time is the time between two consecutive receipts of inventory from suppliers.
(True/False)

1 / 1 point

True

False
Correct
Supply lead time is the time between ordering and receipt of inventories.

1.
Question 1
The raw material inventory for one manufacturing firm can be the finished goods inventory for
another (True / False).
1 / 1 point

True

False
Correct
The steel rolls that go into automobile manufacturing is finished goods inventory for steel mills and
raw material inventory for automobile manufacturing firms.
2.
Question 2
Which of the following is the basis for ABC classification of inventories? (Select the answer that is
most appropriate)
1 / 1 point

Economies of scale.

Nature of inventory depends on stage of manufacturing.

Pareto rule.

Market demand is uncertain.


Correct
The Pareto rule states that 20 percent of the items in a manufacturing context accounts for
approximately 80 percent of the cost and vice-versa. This is the principle behind classification of
inventory as class A (high value), B (medium value) or C (low value) items. Option (a) is not correct
because economies of scale is the cost advantage that accrues due to bulk manufacturing or
procurement in the context of inventories. Option (b) is not correct because stage of manufacturing
process is the basis for classification of inventories as raw material, work-in-process and finished
goods inventories. Finally, option (d) is not correct because fluctuation of demand is the motivation
behind maintaining inventory, but not the ABC classification.

News Paper Model

Let us consider a one period inventory decision for an item whose demand is Normally distributed
with mean 100 units and standard deviation 25 units. The cost of manufacturing the item is $10 per
unit and the selling price of the item is $15. What is the optimal order quantity?
1 / 1 point

75

125

90

10
Correct

If the beginning inventory is worth $100 and the ending inventory is worth $10 in an inventory cycle,
what is the value of average inventory during the cycle?
1 / 1 point

$100

$55
$50

$10
Correct
Average inventory is computed as (beginning inventory + ending inventory)/2. Therefore, average
inventory is (100 + 10)/2 = $55.

2.
Question 2
If the order quantity is 500 units and daily demand is 25 units, what is the cycle time?
1 / 1 point

100

20

15

5
Correct
Cycle time is obtained by dividing the order quantity with daily demand when daily demand is fixed
and known. Therefore, the cycle time is 500/25=20 days.

Steps for calculating optimal order quantity.

Cost of manufacturing (c)=10

Selling price (p)=15

Overage cost (C_o )=c=10

Underage cost (C_u )=p-c=15-10=5

Critical ratio R=C_u/(C_u+C_o )=5/(10+5)=1/3

Q* = NORM.INV(1/3, Mean = 100, Standard Deviation = 25)≈90

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy