30 Questions
What is the primary function of inventory in dealing with sudden changes in market demand?
Buffering from uncertainty in the marketplace
Which type of demand is influenced by trends, seasonal patterns, and general market conditions?
Independent demand
What is an example of a finished good?
Assembled chairs ready to deliver to customers
What is the purpose of maintaining a safety stock of umbrellas?
To meet the sudden demand of customers for an unexpected rainy day
What is an example of a direct cost of inventory?
Cost of labor for manufacturing a chair
Which of the following is NOT a primary function of inventory?
Maximize profit
What is the primary function of inventory management in an organization?
To reduce waste and improve financial performance
What is the difference between dependent and independent demand?
Dependent demand is influenced by the demand for other items, while independent demand is not
What is the main purpose of the ABC inventory control system?
To categorize inventory items based on their importance and value
What is the term for the cost of holding or storing inventory?
Holding or carrying cost
What is one of the main benefits of effective inventory management?
Reducing waste and improving financial performance
What is the term for the total value of inventory held?
Absolute value
What is the quantity discount pricing schedule based on?
Annual demand
What is the Economic Order Quantity (EOQ) formula?
√(2ADOC/CC)
If the University Bookstore orders the EOQ quantity, what is the total annual cost?
$588,142.86
How many times per year does the local electronics store reorder?
4.8
What is the annual carrying cost per unit for the mail-order house?
$50
What is the length of an order cycle for the local electronics store?
0.21
What type of cost is associated with the electricity needed to operate a factory?
Indirect cost
Which type of cost remains constant regardless of the production output quantity?
Fixed cost
What is an example of an order cost?
Purchasing and communication costs needed to process a new wood order to suppliers
What type of cost changes depending on the level of production output quantity?
Variable cost
What is the purpose of measuring the inventory turnover ratio?
To evaluate the efficiency of inventory management
What does a higher inventory turnover ratio generally imply?
More efficient inventory management
What is the purpose of the Economic Order Quantity (EOQ) formula?
To determine the optimal order quantity to minimize total cost
What is the relationship between the ordering cost and holding cost at the EOQ?
The ordering cost equals the holding cost
What is the unit of measurement for the holding cost (H)?
Dollars per unit
What is the length of an order cycle?
The time between orders
What is the total annual cost (TC) formula?
TC = (Q / 2) H + (R / Q) I
What is the purpose of the quantity discount in EOQ?
To reduce the total cost of inventory management
Learn about the concept of inventory, its types, and its role in organizational operations. Understand dependent and independent demand, and the primary functions of inventory management.
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