chapter 12

Question 1

any asset held for future use or sale

Answer 1

inventory

Question 2

: involves planning, coordinating, and controlling the acquisition, storage, handling, movement, distribution, and possible sale of raw materials, component parts and subassemblies, supplies and tools, replacement parts, and other assets that are needed to meet customer wants and needs

Answer 2

inventory management

Question 3

Inventory can serve several functions that add______ to a firm’s operations

Answer 3

flexibility

Question 4

: component parts, subassemblies, and supplies are inpurs to manufacturing and service-delivery processes

Answer 4

Raw materials (RM)

Question 5

: partially finished products in various stages of completion that are awaiting further processing

Answer 5

Work-in-process (WIP)

Question 6

_completed______ products ready for distribution or sale to customers

Answer 6

Finished goods (FG)

Question 7

: the time between _placement______ of an order and its receipt

Answer 7

lead time

Question 8

the inability to satisfy demand for an item

Answer 8

Stockout:

Question 9

when a customer is willing to wait for an item

Answer 9

Backorder:

Question 10

when the customer is hesitant to wait and purchases the item elsewhere

Answer 10

Lost sale:

Question 11

: a single item or asset stored at a particular location

Answer 11

Stock-Keeping Unit (SKU):

Question 12

the result of the work involved in placing purchase orders with suppliers or configuring tools, equipment, and machines within a factory to produce an item

Answer 12

Setup (or ordering) costs:

Question 13

expenses associated with carrying inventory, such as interest, insurance, taxes, deterioration, etc.

Answer 13

Holding (or carrying) costs:

Question 14

: the price paid for purchased goods or the internal cost of producing them

Answer 14

Unit cost (of the Stock-Keeping Units, SKUs)

Question 15

demand for an SKU that is unrelated to the demand for other SKUs and needs to be forecast

Answer 15

independent demand

Question 16

demand directly related to the demand for other SKUs and can be calculated without needing to be forecast

Answer 16

Dependent demand:

Question 17

stable demand

Answer 17

Static demand:

Question 18

varies over time

Answer 18

Dynamic demand:

Question 19

: finished goods, items that are ready to be sold (i.e., a computer)

Answer 19

independent demand

demand is uncertain

Question 20

: components of finished products (i.e., parts that make up the computer)

Answer 20

Dependent demand

demand is certain

Question 21

items account for a large dollar value but relatively small percentage of total items

Answer 21

A

Question 22

items account for a small dollar value but a large percentage of total items
50% to 60% of items, but

Answer 22

C

Question 23

items are medium dollar value

About 30% of items and 15% dollar value

Answer 23

B

Question 24

the counting by hand, weight or bulk of all items in a company’s inventory to _validate______ record accuracy
Usually taken annually or semi-annually

Answer 24

Physical inventory:

Question 25

the counting of inventory items on a continuous basis by an independent team of cycle counters. The counting activities are structured so each item is counted at least _once_____ a year

Answer 25

Cycle counting:

Question 26

model is a classic conomic model developed in the early 1900’s that minimizes total cost which is the sum of the inventory-holding cost (H) and the set-up/ordering cost (S)

Answer 26

The Economic Order Quantity (EOQ)

Question 27

When the quantity on hand of an item drops to this amount, the item is reordered

Answer 27

reorder point (ROP)

Question 28

: Stock that is held in excess of expected demand due to variable demand rate and/or lead time

Answer 28

safety stock

Question 29

The lowest price does not always yield the lowest Total Cost because

Answer 29

holding Costs are increasing

Question 30

a method for dividing on hand inventory into three classifications based on annual dollar volume

Answer 30

ABC analysis