QUESTION 1

1. Which of the following statements is TRUE?

   	a.	The average amount of safety stock depends on the size of ordersplaced with the supplier.
   	b.	The average amount of safety stock depends on the frequency inwhich orders are placed with the supplier.
   	c.	Cycle stock is the amount of inventory on hand when an orderfrom the supplier is placed.
   	d.	Safety stock is the expected amount of inventory on hand when anorder arrives from the supplier.
   	e.	All four answer choices are TRUE

1 points   

QUESTION 2

1. Consider an oilfield service company ( OSC ) that stocks aspecific type of compressor, which they source from an Americansupplier. Since this compressor is the only product that OSCsources from that specific supplier, and given relatively steadydemand of 2,000 compressors throughout the year, OSC uses aContinuous Review (Q) system for managing the inventory of thiscompressor. Orders to replenish stock requires administrative andother work that is estimated to be $40 per order. The compressorsare purchased from the supplier for $325 each. It is estimated thatannual inventory holding costs are 27% of the value of the item.The time from when an order is placed with the supplier until itarrives averages three weeks (including time to clear customs).

   What is the order quantity that OSC should use for thesecompressors if they wish to minimize total annual holding andordering costs?

   	a.	115
   	b.	44
   	c.	22
   	d.	52
   	e.	43

1 points   

QUESTION 3

1. The Cheezy-Pretz corporation manufactures and distributescheese-coated pretzels. They purchase their cheese, which come froma specific supplier in 10 kg packages, in batches of 500 kg (i.e.they currently order in lots of 50 packages at a time). Thisamounts to approximately an order every month, since annual demandis 600 packages. Each package costs Cheezy-Pretz $7, and theyestimate that holding a package in inventory costs $1.75 per year.Further, they have studied their ordering process and estimate thatit costs them $35 to place an order. They have been told that ifthey find the optimal order quantity, they could save money onannual ordering plus holding costs. Cheezy-Pretz would like to knowhow much they would save per year in ordering plus holding costs ifthey used the EOQ rather than their current order quantity of 50packages at a time.

   	a.	<$100 per year
   	b.	>100 per year but < $150 per year
   	c.	>$150 per year but < $200 per year
   	d.	>$200 per year but < $250 per year
   	e.	>$300 per year

QUESTION 4

1. A night club that operates seven days a week uses a periodicreview system where they check the stock of beer and liquor everyTuesday (at noon) and place an order that arrives on Thursday (atnoon). They have found that demand for Silk beer ( smooth as silk )averages 4.5 units per day with a standard deviation of 1.75 units.In any given week, they would like to be 95% sure that they don’ trun out of Silk beer before their order arrives. On Tuesday, ifthey have 16 units of beer on hand, how many units should theyorder?

   	a.	38
   	b.	39
   	c.	34
   	d.	23
   	e.	43

1 points   

QUESTION 5

1. The QRS Restaurant Supplier Co. is a wholesaler/distributor thatsupplies clients in the restaurant business with fresh perishables(e.g., produce) as well as equipment and supplies. One product thatQRS provides to their customers (restaurants) is plasticstretch-wrap that comes in special extra-large rolls. QRS sellsrolls from their inventory to their customers, and the inventory atthe QRS warehouse is replenished by the stretch-wrap manufacturerin Ann Arbor, MI.

   QRS collected the following specific inventory-related data:
   
   Weekly demand (in rolls): average 42/week; standard deviation16/week
   
   Annual demand (in rolls; assuming that demand occurs 52weeks/year): 2,184
   
   Purchase price (QRS pays manufacturer) per roll: $54 Canadian
   
   QRS cost to place order with manufacturer: $35 per order (includesadministrative costs to issue purchase order, invoice payment,etc.)
   
   XYZ annual cost to hold inventory: 23% of value
   
   Lead time for replenishment from manufacturer: three weeks
   
   Your Question: QRS currently places a replenishment orderfor rolls when their inventory position reaches 160 units. Whatcycle-service level does this imply?

   	a.	98.9%
   	b.	73.9%
   	c.	89.0%
   	d.	96.4%
   	e.	92.9%

QUESTION 6

1. Which of the following statements is TRUE?:

   	a.	A Periodic Review system requires less safety stock than aContinuous Review system.
   	b.	Over the long run, a Periodic Review (P) system and a ContinuousReview (Q) system will generally have the same average orderfrequency and order size as each other (assuming that the manageraims to minimize the total of annual holding and ordering costs inboth of the cases).
   	c.	In a Periodic Review system, order quantities tend to remain thesame from order to order, while in a Continuous Review system,order quantities tend to vary from order to order.
   	d.	A Periodic Review system requires a computerized record-keepingsystem to maintain constant awareness of inventory position.
   	e.	All four answer choices are TRUE

QUESTION 7

1. A gas processing plant has a vat of important industriallubricant for the machinery at the plant. Since an externalsupplier is responsible for maintaining the inventory of thelubricant, the supplier has a sensor set up on the vat that sendsthem a notification (by text message) as soon as the vat reaches aspecific level of remaining volume. The demand for the lubricantaverages 19 litres per day (with a standard deviation of 4.5), andthe supplier requires a four-day lead time to refill the vat(assume it is exactly four days with no variability). If thesupplier wishes to promise a 97.5% cycle-service level, at whatvolume should the sensor be set to contact the supplier? (Pleasedouble-check your answer, even if it shows up as one of the choicesbelow.)

   	a.	76
   	b.	112
   	c.	94
   	d.	85