Question 1 (1 point) A continuous review system is sometimes called a fixed interval reorder system. Question 1 options: True False Save Question 2 (1 point) Which one of the following statements is best? Question 2 options: The level of safety stock maintained decreases when the desired cycle-service level increases. The level of safety stock maintained decreases when the standard deviation of demand during lead-time increases. When no safety stock is maintained, stockouts will occur during approximately 50% of the cycles. The level of safety stock maintained is greater if mean absolute deviation (MAD) is used rather than standard deviation in estimating forecast errors. Save Question 3 (1 point) If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the Inventory Position (IP) is 100 units. Question 3 options: True False Save Question 4 (1 point) The scheduled receipts are orders that have been placed but not yet received. Question 4 options: True False Save Question 5 (1 point) A periodic review system is a system in which an item's inventory position is reviewed periodically rather than continuously. Question 5 options: True False Save Question 6 (1 point) An inventory system answers two important questions: when to order and how much to order. Which of the following statements correctly explains how a Q system (continuous review system) or a P system (periodic review system) answers these questions? Question 6 options: Under a Q system, a fixed quantity is ordered every P time period. Under a Q system, an order is placed to replenish the inventory position up to the target level T when the inventory position reaches the reorder point R. Under a P system, a fixed quantity Q is ordered when the inventory position reaches the reorder point R. Under a P system, an order is placed to replenish the inventory position up to the target level T every P time periods. Save Question 7 (1 point) Which one of the following statements represents an advantage of the P system over the Q system? Question 7 options: Less safety stock is carried to achieve the same service level. The replenishment intervals can be more easily individualized for items. Orders can be more easily combined to the same supplier. A P system is more suitable for quantity discounts and capacity limitations. Save Question 8 (1 point) Which one of the following statements represents an advantage of a Q system over the P system? Question 8 options: A perpetual inventory system is not mandatory. Orders for multiple items from the same supplier can be combined more easily. Fixed replenishment intervals are possible, which can be, administratively, quite convenient. The Q system is more suited for quantity discounts and physical limitations. Save Question 9 (1 point) Which one of the following statements about inventory control systems is best? Question 9 options: A single-bin system is essen ...

1. Question 1 (1 point)
A continuous review system is sometimes called a fixed interval
reorder system.
Question 1 options:
True
False
Save
Question 2 (1 point)
Which one of the following statements is best?
Question 2 options:
The level of safety stock maintained decreases when the desired
cycle-service level increases.
The level of safety stock maintained decreases when the
standard deviation of demand during lead-time increases.
When no safety stock is maintained, stockouts will occur during
approximately 50% of the cycles.
The level of safety stock maintained is greater if mean absolute
deviation (MAD) is used rather than standard deviation in
estimating forecast errors.
Save
Question 3 (1 point)

2. If on-hand inventory = 100 units, scheduled receipts = 100 units
and backorders = 100 units, the Inventory Position (IP) is 100
units.
Question 3 options:
True
False
Save
Question 4 (1 point)
The scheduled receipts are orders that have been placed but not
yet received.
Question 4 options:
True
False
Save
Question 5 (1 point)
A periodic review system is a system in which an item's
inventory position is reviewed periodically rather than
continuously.
Question 5 options:
True
False
Save
Question 6 (1 point)

3. An inventory system answers two important questions: when to
order and how much to order. Which of the following
statements correctly explains how a Q system (continuous
review system) or a P system (periodic review system) answers
these questions?
Question 6 options:
Under a Q system, a fixed quantity is ordered every P time
period.
Under a Q system, an order is placed to replenish the inventory
position up to the target level T when the inventory position
reaches the reorder point R.
Under a P system, a fixed quantity Q is ordered when the
inventory position reaches the reorder point R.
Under a P system, an order is placed to replenish the inventory
position up to the target level T every P time periods.
Save
Question 7 (1 point)
Which one of the following statements represents an advantage
of the P system over the Q system?
Question 7 options:
Less safety stock is carried to achieve the same service level.
The replenishment intervals can be more easily individualized
for items.
Orders can be more easily combined to the same supplier.
A P system is more suitable for quantity discounts and capacity
limitations.

4. Save
Question 8 (1 point)
Which one of the following statements represents an advantage
of a Q system over the P system?
Question 8 options:
A perpetual inventory system is not mandatory.
Orders for multiple items from the same supplier can be
combined more easily.
Fixed replenishment intervals are possible, which can be,
administratively, quite convenient.
The Q system is more suited for quantity discounts and physical
limitations.
Save
Question 9 (1 point)
Which one of the following statements about inventory control
systems is best?
Question 9 options:
A single-bin system is essentially a P system, with the target
inventory and current inventory position established visually.
A base-stock system minimizes ordering and setup costs by
placing orders more infrequently.
The base-stock system is mostly used for inexpensive items
because it maximizes cycle inventory costs.
Visual systems are intended for use with high-value items, such

5. as jet engines, that don't experience a steady demand.
Save
Question 10 (1 point)
If on-hand inventory = 100 units, scheduled receipts = 100 units
and backorders = 100 units, the Inventory Position (IP) is the
sum of the three, or 300 units.
Question 10 options:
True
False
Save
Question 11 (1 point)
Which one of the following descriptions best defines the cycle-
service level as a measure of customer service?
Question 11 options:
the preferred proportion of annual demand instantaneously
filled from stock
the number of stockouts tolerated per year
the preferred proportion of days in the year when an item is in
stock
the desired probability of not running out of stock in any one
inventory cycle
Save
Question 12 (1 point)
As the service level increases, the probability of not running out

6. of stock during a cycle decreases.
Question 12 options:
True
False
Save
Question 13 (1 point)
The two-bin inventory system is a type of visual system.
Question 13 options:
True
False
Save
Question 14 (1 point)
A continuous review system is sometimes called a reorder point
system.
Question 14 options:
True
False
Save
Question 15 (1 point)
Which one of the following statements is best?
Question 15 options:
A P system requires more safety stock than a Q system.

7. A P system lends itself more to quantity discounts than does a Q
system.
A P system requires more administrative control and computer
support than does a Q system.
In a periodic review system, the value of Q is kept the same
from one cycle to another.
Save
Question 16 (2 points)
Scenario 9.6
A company operating under a continuous review system has an
average demand of 50 units per week for the item it produces.
The standard deviation in weekly demand is 20 units. The lead-
time for the item is six weeks, and it costs the company $30 to
process each order. The holding cost for each unit is $10 per
year. The company operates 52 weeks per year. A normal
distribution table is appended to this exam.
Use the information in Scenario 9.6. What is the economic order
quantity (EOQ) for this item?
Question 16 options:
less than or equal to 175 units
greater than 175 units but less than or equal to 200 units
greater than 200 units but less than or equal to 225 units
greater than 225 units
Save
Question 17 (2 points)

8. Scenario 9.7
You are the operations manager of a firm that uses the
continuous-review inventory control system. Suppose the firm
operates 52 weeks a year, 365 days, and has the following
characteristics for its primary item:
Demand = 25,000 units/year
Ordering cost = $30/order
Holding cost = $8/unit/year
Lead time = 2 weeks
Standard deviation in weekly demand = 100 units
A normal distribution table is appended to this exam.
Use the information in Scenario 9.7. What is the annual cost of
holding safety stock for this item if they use a 90% service
level?
Question 17 options:
less than or equal to $1,500
greater than $1,500 but less than or equal to $1,550
greater than $1,550 but less than or equal to $1,600
greater than $1,600
Save
Question 18 (2 points)
Scenario 9.6
A company operating under a continuous review system has an
average demand of 50 units per week for the item it produces.

9. The standard deviation in weekly demand is 20 units. The lead-
time for the item is six weeks, and it costs the company $30 to
process each order. The holding cost for each unit is $10 per
year. The company operates 52 weeks per year. A normal
distribution table is appended to this exam.
Use the information in Scenario 9.6. What is the desired safety
stock level if the company has a policy of maintaining a 90%
cycle-service level?
Question 18 options:
less than or equal to 50 units
greater than 50 but less than or equal to 100 units
greater than 100 but less than or equal to 150 units
greater than 150 units
Save
Question 19 (2 points)
Jan Tuttle is the inventory manager of an art supply store. She
uses a periodic review system for all oil paints. The number of
periods between orders (P) for red #68 is 15 workdays. (The
store operates 50 weeks per year, five workdays per week.)
Additional information concerning red #68 follows.
Demand = 30 units/workday
Standard deviation of daily demand = 4 units/workday
Lead-time = 7 workdays
Desired cycle-service level = 85%
A normal distribution table is appended to this exam.
What is the target inventory level T for red #68?

10. Question 19 options:
less than or equal to 550 units
greater than 550 but less than or equal to 600 units
greater than 600 but less than or equal to 650 units
greater than 650 units
Save
Question 20 (2 points)
Scenario 9.5
Cranium, Inc., purchases term papers from an overseas supplier
under a continuous review system. The average demand for a
popular mode is 300 units a day with a standard deviation of 30
units a day. It costs $60 to process each order and there is a
five-day lead-time. The holding cost for a paper is $0.25 per
year and the company policy is to maintain a 98% service level.
Cranium operates 200 days per year. A normal distribution table
is appended to this exam.
Use the information in Scenario 9.5. What service level does a
reorder point of 1,524 imply?
Question 20 options:
less than or equal to 50%
greater than 50% but less than or equal to 55%
greater than 55% but less than or equal to 60%
greater than 60%

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