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In a Q system,average inventory:


A) Is depleted at a constant rate
B) Is set to cover average demand over the lead time plus the review interval
C) Is relatively flat in the neighborhood of the minimum
D) Tends to be less than under a system of periodic review (P system)

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

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Demand for an item is 20 units per week and delivery lead time is 2 weeks.The safety stock is known to be 14 units.Using a P system,and assuming a P value of 3 weeks,what is the target inventory level (T) ?


A) Less than 50
B) Between 50 and 100 (including the values of 50 and 100)
C) More than 100
D) None of the above

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

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The EOQ formula could be modified to express demand and the carrying rate on a monthly basis.

A) True
B) False

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Which of the following is NOT an assumption of the basic EOQ model?


A) Annual demand is constant and known.
B) Lead-time is constant and known.
C) No stockouts are allowed.
D) Quantity discounts are available.

E) All of the above
F) A) and C)

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Lincoln Machine Tool Company maintains an inventory pool consisting of 10 items.Each of these items has a unique demand pattern and may require a different kind of inventory management system.The annual demand pattern and the unit cost of these items are given in the following table.Conduct an ABC inventory analysis and classify these items into A,B,and C type of inventories.Suggest suitable methods for managing these three distinct types of inventories.

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The ABC Classification is done by determ...

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Which cost defines the cost of capital?


A) Item cost
B) Storage cost
C) Deterioration cost
D) Opportunity cost of investment in inventory

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

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Which of the following is correct?


A) Anticipation inventory of raw materials may be held when a firm expects raw materials shortages in the future
B) Pipeline inventory quantities are affected by mode of transportation
C) Safety stock may be held in raw materials,work-in-process,or finished goods
D) All of the above

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

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Unlike a requirements philosophy of inventory management,a replenishment philosophy:


A) Calls for orders based on higher-level items
B) Applies to raw materials inventories
C) Is appropriate given independent demand
D) Causes demand to be dependent

E) None of the above
F) A) and B)

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In the basic EOQ model,if annual demand and carrying costs double,the EOQ:


A) Doubles
B) Increases,but less than double
C) Decreases
D) Remains the same

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

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In the basic EOQ model,if the lead time doubles,the EOQ will:


A) Decrease by half
B) Double
C) Remain the same
D) Increase,but not double

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

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Which of the following statements is true about a Q system?


A) It does not have a reorder point but rather a target inventory.
B) The system is completely determined by the two parameters,Q and R.
C) It does not have an EOQ because the quantity varies according to demand.
D) The order interval is fixed-not the order quantity.

E) None of the above
F) A) and D)

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In an ABC Classification,it is logical to employ a periodic review system to monitor A items.

A) True
B) False

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ABC analysis requires that inventory be classified according to:


A) Alphabetical order by item name
B) Annual dollar usage
C) Activity-based costs
D) Due date

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

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Which cost is NOT part of inventory ordering costs?


A) Transportation costs
B) Obsolescence costs
C) Setup costs
D) Receiving costs

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

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Independent demand inventory consists of:


A) Inventory whose demand comes from independent suppliers
B) Inventory that is independent of any known rules of demand and supply
C) Demand that is related to the demand for another item
D) Inventory whose demand is determined by market conditions outside the firm

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

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Demand for an item is 10 units per week and delivery lead time is 3 weeks.The safety stock is known to be 11 units.Using a Q system,what is the reorder point (R) ?


A) Less than 20
B) 30
C) 41
D) None of the above

E) A) and B)
F) None of the above

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A decrease in an item's lead-time will increase the amount of safety stock required to maintain a constant service level.

A) True
B) False

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The average inventory level is defined as the difference between the cycle stock and the safety stock.

A) True
B) False

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In general,it is extremely difficult to estimate stockout costs and hence we use the desired service levels while computing the reorder points.

A) True
B) False

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