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Homework answers / question archive / Stevenson University BUS 620 MODULE 4 QUIZ 1)The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is When demand is steady, cycle inventory and lot size are related as Inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period is The trade-off that a supply chain manager must consider when planning safety inventory is Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to exploit economies of scale and increase cost

Stevenson University BUS 620 MODULE 4 QUIZ 1)The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is When demand is steady, cycle inventory and lot size are related as Inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period is The trade-off that a supply chain manager must consider when planning safety inventory is Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to exploit economies of scale and increase cost

Business

Stevenson University

BUS 620

MODULE 4 QUIZ

1)The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is

  1. When demand is steady, cycle inventory and lot size are related as
  2. Inventory carried for the purpose of satisfying demand that exceeds the amount forecasted for a given period is
  3. The trade-off that a supply chain manager must consider when planning safety inventory is
  4. Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to exploit economies of scale and increase cost.

 

  1. A lot or batch size is the quantity that a stage of the supply chain either produces or purchases at a given time.
  2. Cycle inventory is the physical inventory in the supply chain due to either production or purchases demanded by the customer.
  3. The inventory profile is a plot depicting the level of inventory over time.
  4. When demand is steady, cycle inventory and lot size are related as follows:

Cycle Inventory = Lot Size × 2 = Q*2

 

  1. Lot sizes and cycle inventory do not affect the flow time of material within the supply chain.
  2. Average flow time resulting from cycle inventory = Cycle Inventory/Demand = Q/2D.
  1. A firm is often better served by ordering a convenient lot size close to the economic order quantity rather than the precise EOQ.
  2. If demand increases by a factor of k, the optimal lot size decreases by a factor of k.

 

  1. To reduce the optimal lot size by a factor of k, the fixed order cost S must be reduced by a factor of k.

 

  1. Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
  2. A key to reducing cycle inventory is the reduction of lot size.
  3. A key to reducing lot size without increasing costs is to reduce the holding cost associated with each lot.

 

  1. Reduction of fixed cost may be achieved by aggregating lots across multiple products, customers, or suppliers.
  2. A discount is volume-based if the pricing schedule offers discounts based on the quantity ordered in a single lot.

 

  1. A discount is volume-based if the discount is based on the total quantity purchased over a given period, regardless of the number of lots purchased over that period.

 

  1. Pricing schedules with all unit quantity discounts encourage retailers to increase the size of their lots, which reduces the average inventory and flow time in a supply chain.

 

  1. Marginal unit quantity discounts have also been referred to as multi-block tariffs.
  2. Quantity discounts lead to a minor buildup of cycle inventory in the supply chain.

 

 

  1. For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to achieve coordination in the supply chain and decrease supply chain cost.
  2. 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.

 

  1. For products where the firm has market power, two-part tariffs can be used to achieve coordination in the supply chain and maximize supply chain profits.

 

  1. Discounts related to price discrimination will be lot size based.

 

  1. Price discrimination is the practice where a firm charges differential prices to maximize profits.
  2. The goal of trade promotions is to influence retailers to act in a way that helps the retailer achieve its objectives.

 

  1. Although a forward buy is often the retailer's appropriate response and increases their own profits, it usually increases demand variability with a resulting increase in inventory and flow times within the supply chain.
  2. Trade promotions lead to a significant increase in lot size and cycle inventory because of forward buying by the retailer.
  3. The fixed ordering cost includes all costs that do not vary with the size of the order but are incurred each time an order is placed.
  4. Holding cost is the cost of carrying one unit in inventory for a specified period of time, usually one year.
  5. The fixed ordering cost is the cost of carrying one unit in inventory for a specified period of time, usually one year.
  6. Cycle inventory exists because producing or purchasing in large lots allows a stage of the supply chain to
  1. exploit economies of scale and raise cost.
  2. exploit economies of scale and lower cost.
  3. exploit customers and lower cost.
  4. exploit customers and raise cost.
  5. none of the above

 

  1. The quantity of inventory that a stage of the supply chain either produces or purchases at a given time is
 
  1. an order.
  2. a job.
  3. a shipment.
  4. a lot or batch.
  5. none of the above

 

  1. The average inventory in the supply chain due to either production or purchases in lot sizes that are larger than those demanded by the customer is
  1. annual inventory.
  2. distribution inventory.
  3. cycle inventory.
  4. physical inventory.
  5. B and C only

 

  1. A graphical plot depicting the level of inventory over time is
  1. an inventory graph.
  2. a distribution inventory.
  3. an inventory drawing.
  4. an inventory profile.
  5. an inventory picture.

 

  1. When demand is steady, cycle inventory and lot size are related as
  1. Cycle Inventory = Lot Size × 2.
  2. Cycle Inventory = Q*2.
  3. Cycle Inventory = Q/2.
  4. Cycle Inventory = Lot Size = Q.
  5. none of the above

 

  1. Average flow time resulting from cycle inventory is equal to
  1. Cycle Inventory/Demand = Q/2.
  2. Cycle Inventory/Demand = Q/2D.
  3. Cycle Inventory = Q/2.
  4. Cycle Inventory = Lot Size = Q.

 

  1. Cycle inventory is primarily held to
  1. take advantage of diseconomies of scale and increase cost within the supply chain.
  2. take advantage of diseconomies of scale and reduce cost within the supply chain.
  3. take advantage of economies of scale and increase cost within the supply chain.
  4. take advantage of economies of scale and reduce cost within the supply chain.

 

  1. Which of the following is not a cost that must be considered in any lot sizing decision?
  1. Average price per unit purchased, $C/unit
  2. Fixed ordering cost incurred per lot, $S/lot
  3. Holding cost incurred per unit per year, $H/unit/year = hC
  4. Manufacturing cost per unit, $M/unit

 

  1. The primary role of cycle inventory is to allow different stages in the supply chain to
  1. purchase product in lot sizes that maximize the sum of the material, ordering, and holding cost.
  2. purchase product in lot sizes that minimize the sum of the material, ordering, and holding cost.
  3. sell product in lot sizes that maximize the sum of the material, ordering, and holding cost.
  4. sell product

 

  1. Economies of scale in purchasing and ordering motivate a manager to
  1. increase the lot size and cycle inventory.
  2. decrease the lot size and cycle inventory.
  3. eliminate inventory.
  4. increase the lot size and reduce cycle inventory.

 

  1. The price paid per unit is referred to as
  1. the material cost and is denoted by C.
  2. the fixed ordering cost and is denoted by S.
  3. the holding cost and is denoted by H.
  4. the purchase price and is denoted by P.

 

  1. All costs that do not vary with the size of the order but are incurred each time an order is placed are referred to as
  1. the material cost and is denoted by C.
  2. the fixed ordering cost and is denoted by S.
  3. the holding cost and is denoted by H.
  4. the purchase price and is denoted by P.

 

  1. The cost of carrying one unit in inventory for a specified period of time, usually one year, is referred to as
  1. the material cost and is denoted by C.
  2. the fixed ordering cost and is denoted by S.
  3. the holding cost and is denoted by H.
  4. the purchase price and is denoted by

 

  1. Which of the following would not be an example of a fixed ordering cost?
  1. Administrative cost incurred to place an order
  2. Trucking cost incurred to transport an order
  3. Labor cost incurred to receive an order
  4. Labor cost incurred to manufacture a part

 

  1. Which of the following would not be included in holding cost?
  1. Cost of capital
  2. Cost of physically storing the inventory
  3. Cost of manufacturing
  4. Cost that results from the product becoming obsolete

 

  1. Total ordering and holding costs
  1. are relatively stable.
  2. are relatively stable around the economic order quantity.
  3. are relatively unstable around the economic order quantity.
  4. are unstable.

 

  1. If demand increases by a factor of k, the optimal lot size increases by a factor of
  1. k.
  2. k/2.
  3. k + 2.
  4. k-squared.
  5. the square root of k.

 

  1. Aggregating across products, retailers, or suppliers in a single order allows for
  1. an increase in lot size for individual products.
  2. an increase in customer demand.
  3. a reduction in holding cost per unit.
  4. a reduction in lot size for individual products.
  5. a reduction in purchase price per unit.

 

  1. Aggregating across products, retailers, or suppliers in a single order allows for a reduction in lot size for individual products because
  1. fixed ordering and transportation costs are now charged to retailers.
  2. fixed ordering and transportation costs are now charged to suppliers.
  3. fixed ordering and transportation costs are now spread across multiple products, retailers, or suppliers.
  4. holding costs are now charged to retailers or suppliers.

 

  1. A key to reducing cycle inventory is
  1. the reduction of holding cost.
  2. the reduction of manufacturing cost.
  3. the reduction of lot size.
  4. the reduction of warehouse space.

 

  1. A key to reducing lot size without increasing costs is to
  1. reduce the holding cost associated with each lot.
  2. reduce the fixed cost associated with each lot.
  3. reduce the material cost associated with each lot.
  4. reduce the manufacturing cost associated with each lot.
  5. increase the holding cost associated with each lot.

 

  1. A price discount where the pricing schedule offers discounts based on the quantity ordered in a single lot is
  1. customer based.
 
  1. lot size based.
  2. supplier based.
  3. volume based.

 

  1. 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
  1. customer based.
  2. lot size based.
  3. supplier based.
  4. volume based.

 

  1. Pricing schedules with all unit quantity discounts encourage retailers to
  1. decrease the size of their lots.
  2. increase the size of their lots.
  3. decrease the size of their inventory.
  4. increase the price of their products.

 

  1. In the pricing schedule for marginal unit quantity discounts
  1. the average cost of a unit decreases at a breakpoint.
  2. the average cost of a unit increases at a breakpoint.
  3. the marginal cost of a unit decreases at a breakpoint.
  4. the marginal cost of a unit increases at a breakpoint.

 

  1. Quantity discounts lead to
  1. a significant buildup of cycle inventory in the supply chain.
  2. a slight buildup of cycle inventory in the supply chain.
  3. a decrease in cycle inventory in the supply chain.
  4. minor fluctuations of cycle inventory in the supply chain.

 

  1. For commodity products where price is set by the market, manufacturers can use lot size based quantity discounts to
  1. achieve coordination in the supply chain and increase supply chain cost.
  2. relax coordination in the supply chain and increase supply chain cost.
  3. relax coordination in the supply chain and decrease supply chain cost.
  4. achieve coordination in the supply chain and decrease supply chain cost.

 

  1. In a supply chain where each stage of the supply chain independently makes its pricing decisions with the objective of maximizing its own profit,
  1. supply chain profit is lower than a coordinated solution.
  2. supply chain profit is higher than a coordinated solution.
  3. supply chain profit is about the same as a coordinated solution.
  4. supply chain profit will be maximized.

 

  1. 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
  1. two-part tariffs or volume based quantity discounts.
  2. marginal unit quantity discounts.
  3. all unit quantity discounts.
  4. basic quantity discounts.

 

  1. The practice where a firm charges differential prices to maximize profits is
  1. lot pricing.
  2. marginal pricing.
  3. price incrimination.
  4. price discrimination.

 

  1. Discounts related to price discrimination will be
  1. volume based.
  2. unit based.
  3. marginally based.
  4. lot size based.

 

  1. The goal of trade promotions is to
  1. influence retailers to act in a way that helps the retailer achieve its objectives.

 

  1. influence retailers to act in a way that helps the manufacturer achieve its objectives.
  2. influence retailers to act in a way that will maximize supply chain profit.
  3. influence retailers to act in a way minimize supply chain cost.

 

  1. Which of the following is not a key goal (from the manufacturer's perspective) of a trade promotion?
  1. Induce retailers to use price discounts, displays, or advertising to spur sales.
  2. Shift inventory from the manufacturer to the retailer and the customer.
  3. Shift inventory from the retailer to the customer.
  4. Defend a brand against competition.

 

  1. Which of the following is a possible response that a retailer could make to a trade promotion?
  1. Pass through some or all of the promotion to customers to spur sales.
  2. Pass through very little of the promotion to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price.
  3. Shift inventory from the retailer to the customer.
  4. A and B only

 

  1. When the retailer decides to pass through some or all of the promotion to customers to spur sales, the result is
  1. a lowering of the price of the product for the end customer.
  2. increased purchases and thus increased sales for the entire supply chain.
  3. an increase in the amount of inventory held at the retailer.
  4. A and B only

 

  1. When the retailer decides to pass through very little of the promotion to customers but purchase in greater quantity during the promotion period to exploit the temporary reduction in price, the result is
  1. a lowering of the price of the product for the end customer.
  2. increased purchases and thus increased sales for the entire supply chain.
  3. an increase in the amount of inventory held at the retailer.
  4. all of the above

 

  1. The manufacturer can justify offering trade promotions resulting in forward buying by retailers when
  1. they have inadvertently built up a lot of excess inventory.
  2. the forward buy allows the manufacturer to smooth demand by shifting it from peak to low-demand periods.
  3. the retailer decreases his total cost.
  4. A and B only

 

  1. The retailer can justify the forward buying when
  1. they have inadvertently built up a lot of excess inventory.
  2. the forward buy allows the manufacturer to smooth demand by shifting it from peak to low-demand periods.
  3. it decreases his total cost.
  4. A and C only

 

  1. Replenishment orders in multi-echelon supply chains should be
  1. synchronized to increase cycle inventory and order costs.
  2. synchronized to facilitate supplier evaluation and selection.
  3. synchronized to keep cycle inventory and order costs low.
  4. separated to increase cycle inventory and order costs.

 

  1. When developing estimates for holding and ordering costs, it is important to
  1. estimate these costs to a high level of precision.
  2. get a good approximation quickly.
 
  1. develop estimates that will not be changed.
  2. both A and C

 

  1. Which cost takes into account the return demanded on the firm's equity and the amount the firm must pay on its debt?
  1. Cost of capital
  2. Obsolescence (spoilage) cost
  3. Handling cost
  4. Occupancy cost

 

  1. Which cost estimates the rate at which the value of the product being stored drops either because the market value of that product drops or because the product quality deteriorates?
  1. Cost of capital
  2. Obsolescence (spoilage) cost
  3. Handling cost
  4. Occupancy cost

 

  1. Which cost should only include receiving and storage costs that vary with the quantity of product received?
  1. Cost of capital
  2. Obsolescence (spoilage) cost
  3. Handling cost
  4. Occupancy cost

 

  1. Which cost should reflect the incremental change in space cost due to changing cycle inventory?
  1. Cost of capital
  2. Obsolescence (spoilage) cost
  3. Handling cost
  4. Occupancy cost

 

  1. Which of the following would not be a component of order cost?
  1. Buyer time
  2. Transportation cost
  3. Handling cost
  4. Receiving cost

 

  1. Cycle inventory exists in a supply chain because different stages exploit economies of scale to
  1. lower total cost.
  2. raise quality.
  3. improve reliability.
  4. synchronize the supply chain.

 

  1. Inventory holding cost does not include which of the following?
  1. Cost of capital
  2. Handling cost
  3. Ordering cost
  4. Occupancy cost

 

  1. Ordering costs would include which of the following?
  1. Cost from theft
  2. Transportation cost
  3. Security cost
  4. Damage cost

 

  1. Inventory holding costs would include which of the following?
  1. Transportation cost
  2. Buyer time
  3. Obsolescence cost
  4. Receiving cost

 

  1. The trade-off that a supply chain manager must consider when planning safety inventory is

 

  1. As the safety inventory is increased,
  2. If the ordering cost S doubles, the optimal lot size will:
  3. A company that tracks inventory and places an order for a lot size Q when the inventory declines to the reorder point (ROP) is using

 

  1. Weekly demand for Motorola cell phones at a Best Buy store is normally distributed, with a mean of 300 and a standard deviation of 200. Motorola takes two weeks to supply a Best Buy order. The Best Buy store has a policy of ordering cell phones from Motorola in lots of 500. The Best Buy store wants to carry at least 3 weeks of inventory. In other words, whenever the inventory level drops down to 900 units, they place an order to replenish the cell phones from Motorola.

What is the safety inventory under current policy?

  1. Best Buy is targeting a CSL of 95%. How much safety inventory should the store keep to meet the target?
  2. Best Buy is targeting a CSL of 95%. What is the annual inventory holding cost?
  3. If Best Buy is targeting a fill rate of 99.5%, what should the ROP be?
  4. If the supply lead time for Motorola increases to three weeks, in order to maintain a same level of productive availability, the store manager should
  5. Weekly demand for Motorola cell phones at a Best Buy store is normally distributed, with a mean of 300 and a standard deviation of 200. Motorola takes two weeks to supply a Best Buy order. The store manager has decided to follow a periodic review policy to manage inventory. She plans to order every three weeks. Each phone costs

$100, and Best Buy incurs a holding cost of 20 percent per year.

 

What is the cycle inventory in this system?

  1. Given a desired CSL of 95%, what should the OUL be?
  2. Given a desired CSL of 95%, what is the annual inventory holding cost?
  3. If Best Buy is targeting a fill rate of 99.5%, what should the safety inventory be?

 

  1. If Best Buy orders cell phones every four weeks (instead of three weeks), in order to maintain a same level of productive availability, the store manager should

 

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