# MIS 373 ch. 13 Inventory Management

which of the following statements about reorder point ordering is true?

safety stock is required if lead time is available

safety stock is required if demand is available

safety stock is required if demand is available

the goal of inventory management is to find a____between___ __and keeping___reasonable

balance; service level; costs

steps for ABC approach

1. multiply annual volume by unit price for each item

2. arrange items in descending order by annual dollar value

3. classify the items as A B or C

2. arrange items in descending order by annual dollar value

3. classify the items as A B or C

fill in blank:

periodic inventory systems take physical inventory counts; perpetual inventory systems continuously keep track of changes to the inventory system

true about inventory costs:

holding costs can include the cost of insurance

ordering and setup costs are treated the same

ordering and setup costs are treated the same

inventory is a __ or __ of goods

stock; store

assumptions of EOQ model:

annual demand is known

lead time is known

lead time is known

single period model:

used for ordering items that have a limited lifespan

it balances costs of shortage and excess

it balances costs of shortage and excess

___ stock is the amount of inventory required to meet expected demand. ___ stock is inventory carried to reduce the probability of a___

cycle; safety; stockout

total cost in quantity discount model=

(Imax/2)H + (D/Q)S

steps for finding EOQ in quantity discount model with variable H:

1. compute the minimum point for each price range until you find a feasible point. Start with the lowest price

2. If the minimum point at the lowest cost is feasible, it is the optimal solution

3. otherwise, compare total costs at the price breaks for all lower prices wit the total cost of the feasible minimum point

4. the optimal point is the quantity that yields the lowest total cost

2. If the minimum point at the lowest cost is feasible, it is the optimal solution

3. otherwise, compare total costs at the price breaks for all lower prices wit the total cost of the feasible minimum point

4. the optimal point is the quantity that yields the lowest total cost

possible types of inventory:

finished goods, raw materials, in-transit goods, work-in process

steps for selecting EOQ when H is constant:

1. compute the common minimum point

2. identify the price at which the minimum point is feasible

3. if the feasible point is not on the lowest range, compute the total cost for all price points at or below the feasible point

4. select the point with the lowest cost

2. identify the price at which the minimum point is feasible

3. if the feasible point is not on the lowest range, compute the total cost for all price points at or below the feasible point

4. select the point with the lowest cost

NOT true about inventory control systems:

orders int the two-bin systems may not be placed at the right time

some businesses are moving towards using RFID tags to track inventory

some businesses are moving towards using RFID tags to track inventory

annual holding cost in EOQ model=

(Q/2)H

TRUE about discrete stocking levels in the single-period model:

-if the SL is equal to one of the probabilities, both that level and the next higher one have the same minimum cost

-after finding the optimal service level, pick the next highest stocking level

-after finding the optimal service level, pick the next highest stocking level

NOT a normal function of inventory:

to take advantage of existing storage space

the___is the percentage of demand filled by the ___on hand

fill rate; stock

___ is a physical count of items in inventory

cycle counting

TRUE about quantity discount models:

-the optimal quantity may not be the same as the EOQ

-there are 2 possible cases for what the value of H, fixed or dependent on the purchase price

-total cost must include product cost to evaluate options

-there are 2 possible cases for what the value of H, fixed or dependent on the purchase price

-total cost must include product cost to evaluate options

TRUE about the EOQ model:

-orders are placed when there is just enough inventory left to cover the lead time of demand

-the EOQ minimized the total annual cost

-the EOQ minimized the total annual cost

TRUE about inventory control

-inventory mangers must decide how much to order

-one of the goals is to keep inventory costs within reasonable bounds

-one of the goals is to achieve good customer service

-one of the goals is to keep inventory costs within reasonable bounds

-one of the goals is to achieve good customer service

NOT TRUE about economic production quantity:

the assumptions are the same as EOQ model

-the maximum inventory level is the same as the EPQ

-the maximum inventory level is the same as the EPQ

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