MGSC 395 Final Questions With Solutions
A stockout occurs when an item that is typically stocked is not available to satisfy a demand the
moment it occurs. True
A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled
later. True
Setup cost is indepe...
A stockout occurs when an item that is typically stocked is not available to satisfy a demand the
moment it occurs. True
A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled
later. True
Setup cost is independent of order size True
Reducing setup costs will increase the pressure to keep larger inventories. False
Increasing inventory levels can sometimes help a firm reduce both its inbound and outbound
transportation costs. True
A quantity discount is attractive because there is a drop in the price per unit when the order is
sufficiently large. True
Repeatability is an undesirable feature of some orders because they must be repeated until the
order is filled correctly. False
, MGSC 395 Final Questions With Solutions
The primary lever to reduce anticipation inventory is to place orders closer to the time when they
must be received. False
A stock-keeping unit (SKU) is an individual item or product that has an identifying code and is
held in inventory somewhere along the supply chain. True
A stock-keeping unit (SKU) is a specially designed container for holding a specific amount of an
inventory item somewhere along the supply chain False
ABC analysis is a process for categorizing SKUs according to dollar usage so that managers can
focus on items with the highest dollar value. True
When using ABC analysis, class C SKUs should be reviewed frequently. False
Cycle counting is an inventory-control method whereby storeroom personnel physically count a
small percent of the total number of items each day. True
, MGSC 395 Final Questions With Solutions
EOQ should be used if you use a make-to-order strategy and the customer specifies the entire
order be delivered in one shipment. False
EOQ should be used if you follow a make-to-stock strategy and the item has relatively stable
demand. True
The EOQ is the smallest lot size that a supplier will allow a customer to order. False
As the annual demand increases, the EOQ also increases. True
Considering the EOQ model, smaller lots are justified when holding costs are decreased.
False
Considering the EOQ model, a reduction in ordering costs justifies reducing the lot sizes ordered.
True
Dependent demand items are those items for which demand is influenced by market conditions
and is not related to inventory decisions for any other item held in stock. False
, MGSC 395 Final Questions With Solutions
Independent-demand items are those items for which demand is influenced by market conditions
and is not related to inventory decisions for any other items held in stock. True
If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the
Inventory Position (IP) is the sum of the three, or 300 units. False
If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the
Inventory Position (IP) is 100 units. True
A continuous review system is sometimes called a reorder point system. True
A continuous review system is sometimes called a fixed interval reorder system. False
The scheduled receipts are orders that have been placed but not yet received True
As the service level increases, the probability of not running out of stock during a cycle
decreases. True
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