OSCM 373 Exam 3 MASTER Set UPDATED ACTUAL QUESTIONS AND CORRECT
ANSWERS
What are the primary objectives of inventory Balance customer service, minimize costs, and ensure product availability
management?
What are the major inventory performance measures? Inventory turnover, fill rate, stockout rate, carrying costs
What does ABC inventory classification do? Categorizes inventory by value and importance using A B and C classes
What characterizes A items in ABC analysis? High value low volume items needing tight control
What characterizes B items in ABC analysis? Moderate value and moderate control items
What characterizes C items in ABC analysis? Low value high volume items needing simple controls
What is a perpetual inventory system? Continuous tracking of inventory levels in real time
What is a periodic inventory system? Inventory updated only at specific intervals
Difference between perpetual and periodic inventory Perpetual is continuous tracking periodic updates occasionally
systems?
What are holding costs? Costs of storing inventory including insurance space obsolescence
What are ordering costs? Costs of placing and receiving an order
What tradeoff exists in inventory management? Higher order quantities reduce ordering costs but raise holding costs
What is EOQ used for? Determine optimal order quantity minimizing total inventory cost
In EOQ D equals Annual demand
In EOQ S equals Ordering or setup cost
In EOQ H equals Annual holding cost per unit
If demand increases what happens to EOQ? EOQ increases
If ordering cost increases what happens to EOQ? EOQ increases
, If holding cost increases what happens to EOQ? EOQ decreases
Total inventory cost formula H(Q/2)+SD/Q
At EOQ what is true about ordering and holding costs? They are equal
What is reorder point ROP? Inventory level where a new order is placed
In ROP d represents Demand rate
In ROP LT represents Lead time
If lead time increases what happens to reorder point? It increases
If demand increases what happens to reorder point? It increases
What is safety stock? Extra inventory held to reduce stockout risk
Higher service level effect on safety stock? Increases safety stock
What does z score represent in inventory? Desired service level protection factor
Higher demand variability effect on safety stock? Increases safety stock
Longer lead time effect on safety stock? Increases safety stock
Lower acceptable stockout risk effect on safety stock? Increases safety stock
What is lead time demand? Demand expected during replenishment lead time
What does inventory turnover measure? How often inventory cycles through per period
High inventory turnover generally indicates Efficient inventory management
What is stockout risk? Probability demand exceeds inventory during lead time
Purpose of using z table in inventory? Find z score for service level
What is cycle stock? Inventory from ordering in batches
What is anticipation inventory? Inventory built ahead for expected demand changes
ANSWERS
What are the primary objectives of inventory Balance customer service, minimize costs, and ensure product availability
management?
What are the major inventory performance measures? Inventory turnover, fill rate, stockout rate, carrying costs
What does ABC inventory classification do? Categorizes inventory by value and importance using A B and C classes
What characterizes A items in ABC analysis? High value low volume items needing tight control
What characterizes B items in ABC analysis? Moderate value and moderate control items
What characterizes C items in ABC analysis? Low value high volume items needing simple controls
What is a perpetual inventory system? Continuous tracking of inventory levels in real time
What is a periodic inventory system? Inventory updated only at specific intervals
Difference between perpetual and periodic inventory Perpetual is continuous tracking periodic updates occasionally
systems?
What are holding costs? Costs of storing inventory including insurance space obsolescence
What are ordering costs? Costs of placing and receiving an order
What tradeoff exists in inventory management? Higher order quantities reduce ordering costs but raise holding costs
What is EOQ used for? Determine optimal order quantity minimizing total inventory cost
In EOQ D equals Annual demand
In EOQ S equals Ordering or setup cost
In EOQ H equals Annual holding cost per unit
If demand increases what happens to EOQ? EOQ increases
If ordering cost increases what happens to EOQ? EOQ increases
, If holding cost increases what happens to EOQ? EOQ decreases
Total inventory cost formula H(Q/2)+SD/Q
At EOQ what is true about ordering and holding costs? They are equal
What is reorder point ROP? Inventory level where a new order is placed
In ROP d represents Demand rate
In ROP LT represents Lead time
If lead time increases what happens to reorder point? It increases
If demand increases what happens to reorder point? It increases
What is safety stock? Extra inventory held to reduce stockout risk
Higher service level effect on safety stock? Increases safety stock
What does z score represent in inventory? Desired service level protection factor
Higher demand variability effect on safety stock? Increases safety stock
Longer lead time effect on safety stock? Increases safety stock
Lower acceptable stockout risk effect on safety stock? Increases safety stock
What is lead time demand? Demand expected during replenishment lead time
What does inventory turnover measure? How often inventory cycles through per period
High inventory turnover generally indicates Efficient inventory management
What is stockout risk? Probability demand exceeds inventory during lead time
Purpose of using z table in inventory? Find z score for service level
What is cycle stock? Inventory from ordering in batches
What is anticipation inventory? Inventory built ahead for expected demand changes
