OPMA 317 Final Exam UPDATED
QUESTIONS AND CORRECT ANSWERS
What two questions are the basis for inventory management? - CORRECT
ANSWER When to order?
How much to order?
Inventory Costs components - CORRECT ANSWER Item Costs (C*Q)
Setup Costs (Replenishment)
Holding Costs (H=iC)
Periodic Review - CORRECT ANSWER Inventory is checked at regular intervals
(Fixed timing)
"order-up-to-level" (varied quantities)
Continuous Review - CORRECT ANSWER inventory levels are constantly monitored
to determine when to place a replenishment order at reorder point (Varied timing)
Fixed order quantity (Fixed quantity)
Fast "usage" recording - CORRECT ANSWER - Press button on shelf each time an
item is
taken (low admin-periodic)
- Button tied to software systems that
maintains on-hand inventory quantities (constant tracking-continuous)
"Backflushing" - CORRECT ANSWER - Record that product was completed in
software (low admin-periodic)
- All required components (based on bill-of-material) are then automatically reduced
(tracking- continuous)
, independent demand - CORRECT ANSWER the demands for various items are
unrelated to each other
Dependant Demand - CORRECT ANSWER demand for a porduct or service caused by
the demand for other products or services
EOQ Limitations - CORRECT ANSWER 1. Demand is constant and known (no
demand uncertainty)
2. Replenishment lead time is known (no supply uncertainty)
3. No shortages allowed (stockout cost ignored)
Solution to EOQ limitations - CORRECT ANSWER "safety stock"- Extra inventory
that a company holds to protect itself against uncertainties in either demand or replenishment
time.
ABC Classification - CORRECT ANSWER A method for determining level of control
and frequency of review of inventory items by dividing into three classifications depending
on annual dollar usage.
A = Top 15% (70-80% of total dollar usage)
B = Next 35% (15-25% of total dollar usage)
C = Last 50% (5% of annual dollar value)
Use of ABC classification - CORRECT ANSWER The main advantage of dividing
inventory into categories is that it allows appropriate controls and policies to be developed for
each class.
- purchasing and supplier development
- demand forecasting
- physical inventory control
- inventory counting (cycle counting)
QUESTIONS AND CORRECT ANSWERS
What two questions are the basis for inventory management? - CORRECT
ANSWER When to order?
How much to order?
Inventory Costs components - CORRECT ANSWER Item Costs (C*Q)
Setup Costs (Replenishment)
Holding Costs (H=iC)
Periodic Review - CORRECT ANSWER Inventory is checked at regular intervals
(Fixed timing)
"order-up-to-level" (varied quantities)
Continuous Review - CORRECT ANSWER inventory levels are constantly monitored
to determine when to place a replenishment order at reorder point (Varied timing)
Fixed order quantity (Fixed quantity)
Fast "usage" recording - CORRECT ANSWER - Press button on shelf each time an
item is
taken (low admin-periodic)
- Button tied to software systems that
maintains on-hand inventory quantities (constant tracking-continuous)
"Backflushing" - CORRECT ANSWER - Record that product was completed in
software (low admin-periodic)
- All required components (based on bill-of-material) are then automatically reduced
(tracking- continuous)
, independent demand - CORRECT ANSWER the demands for various items are
unrelated to each other
Dependant Demand - CORRECT ANSWER demand for a porduct or service caused by
the demand for other products or services
EOQ Limitations - CORRECT ANSWER 1. Demand is constant and known (no
demand uncertainty)
2. Replenishment lead time is known (no supply uncertainty)
3. No shortages allowed (stockout cost ignored)
Solution to EOQ limitations - CORRECT ANSWER "safety stock"- Extra inventory
that a company holds to protect itself against uncertainties in either demand or replenishment
time.
ABC Classification - CORRECT ANSWER A method for determining level of control
and frequency of review of inventory items by dividing into three classifications depending
on annual dollar usage.
A = Top 15% (70-80% of total dollar usage)
B = Next 35% (15-25% of total dollar usage)
C = Last 50% (5% of annual dollar value)
Use of ABC classification - CORRECT ANSWER The main advantage of dividing
inventory into categories is that it allows appropriate controls and policies to be developed for
each class.
- purchasing and supplier development
- demand forecasting
- physical inventory control
- inventory counting (cycle counting)
