Question 31. Safety stock is held because we anticipate future demand. True False

31. Safety stock is held because we anticipate future demand. True False

32. Variability in demand and/or lead time can be compensated for by safety stock.

True False

33. Solving quality problems can lead to lower inventory levels.

True False

34. ROP models assume that demand during lead time is composed of a series of dependent daily demands.

True False

35. Pro?t margins tend to be inversely related to inventory turns.

True False

36. In the ?xed-order interval model, the order size is the same for each order.

True False

37. The ?xed-order interval model requires a continuous monitoring of inventory levels.

True False

38. Discrete stocking levels are used when an organization doesn’t want visibility of inventory levels.

True False

39. The ?xed-order interval model requires a larger amount of safety stock than the ROP model for the same risk

of a stockout.

True False

40. The single-period model can be very helpful in determining when to order.

True False

41. The single-period model can be very helpful in determining how much to order.

True False

42. Monitoring inventory turns over time can be used as a measure of performance. True False

43. A single-period model would be used mainly by organizations going out of business.

True False

44. The basic EOQ model ignores the purchasing cost.

True False

45. When the item is offered for resale, shortage costs in the single-period model can include a charge for loss of

customer goodwill.

True False

46. In the single-period model, the service level is the probability that demand will not exceed the stocking level in

any period.

True False

47. A quantity discount will lower the reorder point.

True False

48. It is critical that the exact quantity calculated in the EOQ model be ordered.

True False

49. Safety stock eliminates all stock outs.

True False

50. The calculation of safety stock requires knowledge of demand and lead time variability.

True False

51. The two basic issues in inventory are how much to order and when to order.

True False

52. Cycle counting can be used in motorcycle inventory control.

True False

53. Using the EOQ model, the higher an item’s carrying costs, the more frequently it will be ordered. True False

54. The cycle time represents the time between reorder point and receipt of order.

True False

55. The cost of placing an order is a function of order size.

True False

56. All stock outs must be avoided.

True False

57. In the basic EOQ model, annual holding cost is one-half of the total annual cost for all items purchased.

True False

58. Quantity discounts are generally given for large number of orders.

True False

59. The larger the number of orders placed, the larger the average level of inventory.

True False

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