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Exam 11: Managing Economies of Scale in the Supply Chain: Cycle Inventory

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Question 41

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The practice where a firm charges differential prices to maximize profits is

A) lot pricing.
B) marginal pricing.
C) price incrimination.
D) price discrimination.

E) All of the above
F) B) and D)

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Question 42

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Total ordering and holding costs

A) are relatively stable.
B) are relatively stable around the economic order quantity.
C) are relatively unstable around the economic order quantity.
D) are unstable.

E) C) and D)
F) A) and B)

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Question 43

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Quantity discounts lead to

A price discount where the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period, is

Scenario 11.2 - S&H Mercantile The S&H Mercantile in Luther is the only game in town for a number of items, and tries valiantly to use only the storage space needed to display items since there is no stock room in the back of the store. One popular item, a 16-ounce can of dehydrated water, takes up 20 square inches of shelf space. The shelf space available for this item measures five feet by four feet. The store manager would like to order a quantity that can fill the shelf space without stacking and without needing to store cans elsewhere in the store. The amount ordered should all be on display once the S&H runs out and ideally would arrive just as the last can is purchased. -Drought conditions spike demand during the summer to an annualized rate of 27,000 cans per year and the price rises to $12 per can with a holding cost of 20%. What is the required order cost per lot?

In a supply chain where each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit,

A key to reducing cycle inventory is

Scenario 11.1 - Bubble and Squeak The rising popularity of bubble and squeak as a breakfast item on the menu has resulted in a steady demand for peas. Over the course of the past week, 457 patrons have ordered the hearty breakfast and each serving contains a half cup of English peas. It costs two cents to hold a half cup of peas in inventory for a year and $3 to place an order (remember they come all the way from England!) . It takes two weeks to ship a container from England loaded with peas. -What is the average flow time of a half cup of peas if the diner orders at the economic order quantity?

Describe the impact of trade promotions on cycle inventory.

Lot sizes and cycle inventory do not affect the flow time of material within the supply chain.

Aggregating across products, retailers, or suppliers in a single order allows for

For products where the firm has market power, coordination in the supply chain can be achieved and supply chain profits maximized through the use of

The costs considered in lot sizing decisions include material cost, fixed ordering cost, and manufacturing cost.

The primary role of cycle inventory is to allow different stages in the supply chain to

The supply chain profit is higher if each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit.