OMGT Chapter 11 Study Guide | Operations Management Review, Key Concepts
& Practice Questions
Cycle stock can occur at more than one point in a supply chain - correct answer ✔✔T
Companies do not plan to use safety stock - correct answer ✔✔T
Dependent demand inventory never needs hedge inventory - correct answer ✔✔F
The order quantity in a periodic review system rises as the on-hand inventory falls - correct
answer ✔✔T
The reorder point increases as the service level falls - correct answer ✔✔F
A company that orders at their economic order quality has an annual ordering cost that is half
of their total cost - correct answer ✔✔T
In order for the economic order quantity model to work, demand must be known and constant -
correct answer ✔✔T
Decreases in the standard deviation of demand reduce the amount of safety stock that should
be held - correct answer ✔✔T
In order to find the lowest cost ordering policy in a quanityt discount model, you must compare
the holding cost, ordering cost, and the cost of goods for various order quantities - correct
answer ✔✔T
The excess cost of an item is the profit you would have made on it - correct answer ✔✔F
, A target service level is the point where the expected cost of a shortage equals the expected
cost of having excess units - correct answer ✔✔T
Buying advance tickets for the Giraffe Massacre concert on New Year's Eve saves the buyer one-
tenth of one percent on the face value of the tickets. It would be wise to buy tickets well in
advance of the concert date. - correct answer ✔✔F
As the average demand rises, the standard deviation of demand falls. - correct answer ✔✔F
The bullwhip effect says that a small change in demand downstream in the supply chain causes
a large change in demand upstream. - correct answer ✔✔T
The flexibility of inventory increases as materials move down the supply chain. - correct answer
✔✔F
The value of goods on a "per unit" basis far upstream in a supply chain is greater than the value
of those same goods far downstream in a supply chain. - correct answer ✔✔F
Order quantity decisions are typically made in isolation from considerations of transportation,
packaging, and material handling. - correct answer ✔✔F
The inventory that companies hold to protect themselves against uncertainties in either
demand or replenishment time is called: - correct answer ✔✔Safety stock
Individual links in the supply chain can stabilize their production at the most efficient level by
using: - correct answer ✔✔Smoothing inventory
Inventory that is "in the pipeline" is: - correct answer ✔✔Transportation inventory
& Practice Questions
Cycle stock can occur at more than one point in a supply chain - correct answer ✔✔T
Companies do not plan to use safety stock - correct answer ✔✔T
Dependent demand inventory never needs hedge inventory - correct answer ✔✔F
The order quantity in a periodic review system rises as the on-hand inventory falls - correct
answer ✔✔T
The reorder point increases as the service level falls - correct answer ✔✔F
A company that orders at their economic order quality has an annual ordering cost that is half
of their total cost - correct answer ✔✔T
In order for the economic order quantity model to work, demand must be known and constant -
correct answer ✔✔T
Decreases in the standard deviation of demand reduce the amount of safety stock that should
be held - correct answer ✔✔T
In order to find the lowest cost ordering policy in a quanityt discount model, you must compare
the holding cost, ordering cost, and the cost of goods for various order quantities - correct
answer ✔✔T
The excess cost of an item is the profit you would have made on it - correct answer ✔✔F
, A target service level is the point where the expected cost of a shortage equals the expected
cost of having excess units - correct answer ✔✔T
Buying advance tickets for the Giraffe Massacre concert on New Year's Eve saves the buyer one-
tenth of one percent on the face value of the tickets. It would be wise to buy tickets well in
advance of the concert date. - correct answer ✔✔F
As the average demand rises, the standard deviation of demand falls. - correct answer ✔✔F
The bullwhip effect says that a small change in demand downstream in the supply chain causes
a large change in demand upstream. - correct answer ✔✔T
The flexibility of inventory increases as materials move down the supply chain. - correct answer
✔✔F
The value of goods on a "per unit" basis far upstream in a supply chain is greater than the value
of those same goods far downstream in a supply chain. - correct answer ✔✔F
Order quantity decisions are typically made in isolation from considerations of transportation,
packaging, and material handling. - correct answer ✔✔F
The inventory that companies hold to protect themselves against uncertainties in either
demand or replenishment time is called: - correct answer ✔✔Safety stock
Individual links in the supply chain can stabilize their production at the most efficient level by
using: - correct answer ✔✔Smoothing inventory
Inventory that is "in the pipeline" is: - correct answer ✔✔Transportation inventory
