Chapter 20 part 2

Question 1

Optimal order quantity (Qopt) =

Answer 1

this order size minimizes total annual cost

Question 2

TC =
formula

Answer 2

TC =
DC + (D/Q)S + (Q/2)H

Question 3

an order is placed when inventory drops to this level

Answer 3

Reorder point (R )

Question 4

R =
formula

Answer 4

R =
dL

Question 5

d =

Answer 5

average daily demand (constant)

Question 6

L =

Answer 6

lead time in days (constant)

Question 7

the amount of inventory carried in addition to the expected demand

Answer 7

Safety stock

Question 8

The key difference between a fixed order quantity model where demand is known and one where demand is uncertain is in

Answer 8

computing the reorder point

Question 9

Reorder point is R =
formula

Answer 9

R =
dL + zσꜜL

Question 10

R =

Answer 10

reorder point in units

Question 11

z =

Answer 11

number of standard deviations for a specified service probability

Question 12

σꜜL =

Answer 12

standard deviation of usage during lead time

Question 13

zσꜜL =

Answer 13

the amount of safety stock

Question 14

T =

Answer 14

the number of days between reviews

Question 15

I =

Answer 15

current inventory position

Question 16

the cost of goods sold divided by the total average value of inventory. A measure of the expected number of times that inventory is replaced each year

Answer 16

Inventory turn

Question 17

Inventory turn =
formula

Answer 17

cost of goods sold/ average inventory value

Question 18

Average inventory value =
formula

Answer 18

(Q/2 + SS)C

Question 19

Inventory turn for an individual item =
formula

Answer 19

DC/(Q/2 + SS)C = D/Q/2 + SS

Question 20

this model is useful for finding the order quantity of an item when the price of the item varies with the order size

Answer 20

Price break model

Question 21

divides inventory into dollar volume categories that map into strategies appropriate for the category

Answer 21

ABC inventory classification

Question 22

(A)

Answer 22

high dollar volume

Question 23

(B)

Answer 23

moderate dollar volume

Question 24

(C )

Answer 24

low dollar volume

Question 25

A items constitute roughly top ___ of the items

Answer 25

15%

Question 26

B items the next

Answer 26

35%

Question 27

C includes

Answer 27

50%

Question 28

Inventory accuracy

Answer 28

how well inventory records and actual physical count agree

Question 29

Cycle counting

Answer 29

a physical inventory taking technique in which inventory is counted on a frequent basis rather than once or twice a year

Question 30

Easiest time for stock to be counted is when

Answer 30

there is no activity in the stockroom or on the production floor

Question 31

The accuracy level often recommended by experts is

Answer 31

±0.2% for A items,
±1% for B items,
±5% for C items