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POM Lecture (32)

POM Lecture (32)

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Published by muneerpp

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Published by: muneerpp on Aug 14, 2009
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Unit 2Management of Conversion SystemChapter 10: Inventory ManagementLesson 31 - Tutorial 9Good Morning students, today we are going to have a tutorial sessionfor the previous lesson. The overall objective is to appreciate how thetheoretical concepts are translated and applied into practical businesssituations. We would start with a few problems to review our conceptualunderstanding and wind up the session with a well designed case study.I hope the session results into value addition for all of us.Let’s put our thinking caps and start now.
1. A use of inventory is(a) to decouple production and distribution processes(b) to provide a hedge against inflation(c) to enable an organization to take advantage of quantitydiscounts(d) all the above2. ABC analysis divides on-hand inventory into three classes based upon(a) unit price(b) the number of units on hand(c) annual demand(d) annual rupee value3. Cycle counting(a) Provides a measure of inventory turnover (b) Assumes that all inventory records must be verified with thesame frequency(c) Is a process by which inventory records are periodicallyverified
(d) All of the above4. The service industry is improving inventory management by a number of ways. These include:(a) Shrinkage and pilferage(b) Good personal selection(c) Bar coding of incoming and outgoing merchandise(d) a and b above(e) b and c above5. Annual holding costs are often in the range of (a) Under 6% of inventory value(b) 6% to 9% of inventory value(c) 9% to 12% of inventory value(d) 12% to 15% of inventory value(e) over 15% of inventory value6. For most items in inventory, yearly holding costs amount to only afew percent of the unit cost.(a) True(b) False7. The major advantage of cycle counting is(a) Accurate inventory(b) Dispensing with the annual physical inventory(c) The audit activity that accompanies cycle counting(d) None of the above(e) All of the above8. Inventory models under conditions of dependent demand are quitedifferent from those under conditions of independent demand(a) True(b) False9. In an EOQ model, the reorder point is determined by the averagedemand during the lead time.(a) True(b) False
10. The difference(s) between the basic EOQ model and the productionorder quantity model is (are) that(a) the production order quantity model does not require theassumption of known, constant demand(b) the EOQ model does not require the assumption of negligiblelead time(c) the production order quantity model does not require theassumption of instantaneous delivery(d) all of the above11. Extra units held in inventory to reduce stockouts are called(a) reorder point(b) safety stock (c) just-in-time inventory(d) all of the above12. Inventory record accuracy can be improved by(a) cycle counting(b) reorder points(c) ABC analysis(d) All of the above13. The two most important inventory-based questions answered by thetypical inventory model are(a) When to place an order and what is the cost of the order (b) when to place an order and how much of an item to order (c) how much of an item to order and what is the cost of the order (d) how much of an item to order and with whom should the order  be placed14. The appropriate level of safety stock is typically determined by(a) minimizing an expected stockout cost(b) choosing the level of safety stock that assures a given servicelevel(c) carrying sufficient safety stock so as to eliminate all stockouts15. Item X is a standard item stocked in a company’s inventory of component parts. Each year the firm, on a random basis, uses about2000 of item X, which costs Rs25 each. Storage costs, which includeinsurance and cost of capital, amount to Rs5 per unit of average

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