Test Bank For Operations Management 11th Edition By Krajewski Test Bank for all chapters, Supplements are included. Download at :

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1 Test Bank For Operations Management 11th Edition By Krajewski Test Bank for all chapters, Supplements are included. Download at : Solutions Manual for Operations Management Processes And Supply Chains 11th Edition by Lee J. Krajewski, Manoj K. Malhotra, Larry P. Ritzman Download link : Operations Management, 11e (Krajewski et al.) Supplement C: Special Inventory Models C.1 Noninstantaneous Replenishment 1) The economic production lot size represents the maximum quantity of on-hand inventory for a manufacturer. Answer: FALSE 2) For analysis using the economic production lot size (ELS) model to be useful, the producer must be able to produce the item faster than it is consumed. Answer: TRUE 3) Consider a noninstantaneous replenishment situation in which the production rate is 100 units per day, the demand rate is four units per day, and the economic production lot size is 500 units. Which of the following statements is TRUE? A) The average cycle inventory is fewer than 225 units. B) The average cycle inventory is greater than 300 units. C) The rate of buildup in cycle inventory during the production cycle is fewer than 100 units per day. D) The rate of buildup in cycle inventory during the production cycle is greater than or equal to 400 units per day. 1

2 Answer: C 2

3 Scenario C.1 Jerry Allison is in charge of production for a small producer of plumbing supplies. The cricket model has an estimated annual demand of 12,000 units and can be produced at a production rate of 90 units per day. The company produces (and sells) the cricket 300 days per year. Setup cost to produce this model averages $22 and the item has a holding cost of $3 per unit per year. 4) Use the information in Scenario C.1. What is the economic production lot size (ELS)? A) fewer than or equal to 400 units B) greater than 400 units but fewer than or equal to 480 units C) greater than 480 units but fewer than or equal to 500 units D) greater than 500 units Answer: D 5) Use the information in Scenario C.1. How many production runs per year are needed if Jerry chooses to produce at his economic production lot size (ELS)? A) fewer than or equal to 10 runs B) greater than 10 runs but fewer than or equal to 20 runs C) greater than 20 runs but fewer than or equal to 30 runs D) greater than 30 runs Answer: C 6) Use the information in Scenario C.1. If Jerry chooses to produce batches dictated by the economic production lot size (ELS) model, how many days elapse between the start of consecutive production runs (what is the time between runs or TBO)? A) fewer than or equal to 8 days B) greater than 8 days but fewer than or equal to 10 days C) greater than 10 days but fewer than or equal to 12 days D) greater than 12 days Answer: D 3

4 7) Use the information in Scenario C.1. What is the maximum inventory if Jerry chooses to produce at the economic production lot size (ELS)? A) fewer than or equal to 300 units B) greater than 300 units but fewer than or equal to 320 units C) greater than 320 units but fewer than or equal to 340 units D) greater than 340 units Answer: B 8) Use the information in Scenario C.1. If Jerry chooses to produce the batch size suggested by the economic production lot size (ELS) model, what is the annual cost? A) less than or equal to $900 B) greater than $900 but less than or equal to $950 C) greater than $950 but less than or equal to $1000 D) greater than $1000 Answer: B 9) Consider a manufacturer that uses the economic production lot size (ELS) model. What must be the relationship be between production rate and demand rate for the producer to spend double the time in the production and demand portion of the inventory cycle than they spend in only the demand portion of the inventory cycle? A) p = 1.5d B) p = d C) 2p = d D) p = 2d Answer: A 4

5 10) Consider a manufacturer that uses the economic production lot size (ELS) model. What must be the relationship be between production rate and demand rate for the producer to spend exactly the same time in the production and demand portion of the inventory cycle as they spend in only the demand portion of the inventory cycle? A) p = d B) p = 0.5d C) p = 2d D) p = 1.5d Answer: C 11) The time between orders is given by the formula ELS/D. What is the significance of its inverse, D/ELS? A) the number of orders per year B) the time between consuming an order C) the ratio of demand only to production and demand cycles D) the ratio of the maximum inventory to the production quantity Answer: A 12) Consider a manufacturer that uses the economic production lot size (ELS) model. What must the relationship be between production rate and demand rate for the producer to realize a maximum inventory that is exactly two-thirds of their lot size? A) p = 2d B) p = 0.5d C) p = 0.33d D) p = 3d Answer: D 5

6 13) Warren's Ice Cream makes 4 different flavors of ice cream using their secret process and top secret recipes. Each of their flavors is equally popular and experiences a demand of 5,000 gallons/year. Warren's process is capable of producing 100 gallons/day once they incur the $25 setup cost. The ice cream holding cost is 10% of the $5 per gallon price. Warren's plant runs 250 days a year and stays busy doing so, but management feels they can add another flavor to their product line and increase their revenue. Which of the following statements is appropriate for this scenario? A) Warren's can comfortably add a fifth flavor without increasing the number of days they operate. B) Warren's cannot add the fifth flavor because the holding cost would increase. C) Warren's can add the fifth flavor only if there is zero setup time between flavors. D) Warren's cannot add the fifth flavor because demand would exceed capacity. Answer: C Difficulty: Hard 14) In a noninstantaneous replenishment model, as the daily demand approaches the daily production rate, the: A) number of production runs per year decreases. B) length in days of a production run increases. C) economic lot size increases. D) time between production runs decreases. Answer: D 15) The is the optimal lot size in situations in which replenishment is not instantaneous. Answer: economic production lot size, ELS 6

7 16) A manufacturer produces aluminum cans internally rather than purchasing them and uses the economic production lot size equation to govern this process. The length of time that the aluminum can batch runs is given by the equation and the time between the start of one batch of cans to the next is found by the equation. Answer: ELS/p, ELS/d Difficulty: Hard 17) The pile of inventory accumulated in an economic production lot size situation is than the lot size dictated by the ELS calculation. Answer: smaller Difficulty: Hard 18) In an economic production lot size situation, the production rate is always than the demand rate. Answer: greater 19) In an economic production lot size situation, the producer is producing half the time if the ratio of production rate to demand rate is. Answer: 2:1 Difficulty: Hard 20) Briefly explain why the economic production lot size (ELS) is actually larger than the EOQ when there are noninstantaneous replenishments. Answer: The cycle inventory is less than Q/2, which reduces the annual holding cost of ordering Q units. Thus, a larger order quantity is justified. 7

8 21) Sketch the economic production lot size (ELS) graph of inventory level as a function of time and label all elements of the graph. Answer: 22) A production manager is making a decision on batch size for a product with an annual demand of 25,000 units per year. The setup cost for each batch is $45 and once the setup is complete, the product may be produced at the rate of 650 units per day. There is a holding cost of $2 per unit per year and the plant operates on a 250-day production year. How big should the production batch be and how long (in days) will it take to produce the batch? Answer: ELS = = = 1,153 units Production time = = = 1.77 days 8

9 23) Walter White must satisfy an annual demand of 50,000 pounds per year. The setup cost for each batch is $6500 and once the setup is complete, the product may be produced at the rate of 1800 pounds per day. There is a holding cost of $15 per unit per year and the plant operates on a 350-day production year. How big should the production batch be and how long (in days) will it take to produce the batch? Answer: ELS = = = 6, pounds Production time = = = 3.81 days 9

10 24) Walter White must satisfy an annual demand of 50,000 pounds per year. The setup cost for each batch is $6500 and once the setup is complete, the product may be produced at the rate of 1800 pounds per day. There is a holding cost of $15 per unit per year and the plant operates on a 350-day production year. Determine the relevant parameters and sketch the inventory cycle through two complete cycles, labeling all lines and vertices. Answer: ELS = = = 6, pounds = (p - d) = ( ) = 6316 pounds Production time = = = 3.81 days 10

11 25) A production manager uses the economic lot size approach to determine the batch size for a product with an annual demand of 20,000 units per year. The setup cost for each batch is $50 and once the setup is complete, the product may be produced at the rate of 800 units per day. There is a holding cost of $2 per unit per year and the plant operates on a 250-day production year. If the machine used to produce this product is needed for another item and it takes one day to set up regardless of product, how many production days are available for production of the new item? Answer: ELS = = = 1,054 units Production time = = = days Time Between Orders = = = days Available time = days - 1,3175 days - 2 (1 day) = days per cycle = cycles/year 19 cycles/year 19 cycles/year 9,8575 days/cycle = days/year C.2 Quantity Discounts 1) When facing quantity discounts, the EOQ found with the lowest price level is always the lowest total cost plan. Answer: FALSE Reference: Quantity Discounts Difficulty: Easy Keywords: quantity discount AACSB: Application of Knowledge 11

12 2) A pencil supplier just introduced quantity discounts. The price schedule follows. Order Quantity Price per Unit $ $ and more $3.50 XYZ store's annual demand remains at 350 units and ordering cost at $2 per order. If annual holding cost is 30 percent of the pencils' per-unit price, what order quantity should XYZ select to minimize all costs? A) fewer than or equal to 150 units B) greater than 150 units but fewer than or equal to 199 units C) greater than 199 units but fewer than or equal to 399 units D) greater than 399 units Answer: C Reference: Quantity Discounts Keywords: quantity discount 3) Which one of the following statements about quantity discounts is BEST? A) The minimum cost point on each price curve is always feasible. B) A price break is the maximum quantity needed to get a discount. C) If the EOQ for the lowest price is feasible, this is the best lot size. D) Either price or quantity is sufficient for the search for the best lot size. Answer: C Reference: Quantity Discounts Keywords: quantity discount AACSB: Application of Knowledge 12

13 4) As an inventory manager, you must decide on the order quantity for an item. Its annual demand is 350 units. Ordering cost is $20 each time an order is placed, and the holding cost is 30 percent of the per-unit price. Your supplier provided the following price schedule. Price per Unit Order Quantity $ $ $ and more What is the annual cost discrepancy between the optimal order policy and the second best order policy? A) Less than $5 B) Between $5 and $10 C) Between $10 and $20 D) More than $20 Answer: B Reference: Quantity Discounts Keywords: quantity discount 5) When faced with a quantity discount situation, the first EOQ should be calculated using the price. Answer: lowest Reference: Quantity Discounts Keywords: quantity discount AACSB: Application of Knowledge 6) Why are there discontinuities (areas where the curve jumps up or down and is not smooth) in the total cost curve in the quantity discount model? Answer: The total cost curve has breaks due to the price breaks. Reading the total cost curve from left to right, when purchase quantities reach a price break, an increase in one unit will trigger a per-unit decrease in price for all units in the order, which accounts for the reduction in total cost. Reference: Quantity Discounts Keywords: quantity discount AACSB: Application of Knowledge 13

14 7) As an inventory manager, you must decide on the order quantity for an item. Its annual demand is 1,000 units. Ordering costs are $50 each time an order is placed, and the holding cost is 25 percent of the per-unit price. Your supplier provided the following price schedule. Quantity Price per Unit $ $ or more $ 9.60 What ordering-quantity policy do you recommend? Answer: Start at lowest cost Therefore, the best order size is 202, with a cost of $10,295. Reference: Quantity Discounts Keywords: quantity discount 14

15 8) As an inventory manager, you must decide on the order quantity for an item. Its annual demand is 679 units. Ordering costs are $7 each time an order is placed, and the holding cost is 10% of the unit cost. Your supplier provided the following price schedule. Quantity Price per Unit $ $ or more $4.55 What ordering-quantity policy do you recommend? Answer: Start at lowest cost EOQ 4.55 = = = , not feasible Solve for next lowest cost EOQ 9.80 = = = 139, feasible Compare costs at the feasible 139 and at the lower cost for discount at 351 C 139 = H + S + PD = (.10) (7) (679) = $3, C 351 = H + S + PD = (.10) (7) (679) = $3, Therefore, the best order size is 351, with a cost of $3, Reference: Quantity Discounts Keywords: quantity discount C.3 One-Period Decisions 1) If demand exceeds the order quantity in a single period situation, then the payoff is simply the order quantity times the per unit profit. Answer: TRUE Difficulty: Easy 15

16 2) In a one-period inventory model, the after-season sales price may be zero. Answer: TRUE 3) In a one-period inventory model, the higher the after-season sales price, the higher the order placed at the start of the season. Answer: TRUE 4) In a one-period inventory model, the more profitable the item during the sales season, the manager should place a higher order at the start of the season. Answer: TRUE 5) The closer the in-season and after season sales price are, the lower the order placed at the start of the season. Answer: FALSE 6) Use of the the single-period model will maximize profit in every season. Answer: FALSE Difficulty: Easy AACSB: Application of Knowledge 16

17 Scenario C.2 Egan Schranz sells Klammelhoffer skis out of his store in the Alps. The store makes a $75 profit per unit sold during the ski season, but it will take a $25 loss per unit if sold after the season is over. The following discrete probability distribution has been estimated for the season's demand. Demand (D) Demand Probability ) Use the information in Scenario C.2. What is the payoff with an order quantity (Q) of 80 units if the demand (D) is 60 units? A) less than or equal to $3,000 B) greater than $3,000 but less than or equal to $4,000 C) greater than $4,000 but less than or equal to $5,000 D) greater than $5,000 Answer: B 8) Use the information in Scenario C.2. What is the best order quantity? A) 20 units B) 40 units C) 60 units D) 80 units Answer: D 17

18 Scenario C.3 Consider an item with the following discrete demand distribution for a one-period inventory decision. Demand (D) Demand Probability This item experiences a seasonal demand pattern. A profit of $15 per unit is made if the item is sold in season, but a loss of $10 per unit is incurred if the item is sold after the season is over. 9) Use the information in Scenario C.3. What is the payoff when 40 units are ordered but a demand of 50 materializes? A) $150 B) $300 C) $450 D) $600 Answer: D 10) Use the information in Scenario C.3. What is the payoff when 40 units are ordered but a demand of 30 materializes? A) $0 B) $100 C) $350 D) $450 Answer: C 18

19 11) Use the information in Scenario C.3. What is the order quantity with the highest expected payoff? A) 20 units B) 30 units C) 40 units D) 50 units Answer: B 12) A world traveler prepares to leave the comforts of home for a back to nature visit to Gilligan's Island, where all transactions are conducted in coconuts and the banking system is completely undeveloped. The traveler can buy coconuts for $2 each before the journey. If he fails to bring enough coconuts with him and runs out, he must get some coconuts flown in at a cost of $5 each. If he finishes his vacation and has leftover coconuts he can cash them in when he returns home, but will receive only $1.50 per coconut. What is his loss per unit if he overstocks on coconuts prior to leaving home? A) $0.50 B) $1 C) $3.50 D) $4.50 Answer: A Difficulty: Easy 13) Which of these statements about the one-period model is BEST? A) Purchasing a quantity with the highest expected payoff will result in a positive payoff regardless of the actual demand during the period. B) The loss per unit cannot exceed the profit per unit. C) If demand exceeds the purchased quantity then the actual payoff exceeds the expected payoff for that quantity. D) The expected payoff for a purchase quantity is always less than the actual payoff for that quantity. Answer: C Difficulty: Easy 19

20 14) The need for one-time inventory decisions also can arise in manufacturing plants when items are made to a single order and are high. Answer: customized, scrap quantities Difficulty: Hard 15) In a single period model, if purchase quantity Q exceeds demand rate D, then the number of units sold after the season is. Answer: Q-D Difficulty: Easy 16) In a single period model, if the in-season demand is unexpectedly high, then the profit can be calculated as. Answer: pq Difficulty: Easy 17) When do one-period decisions on inventory arise in practice? Answer: The one-period inventory models are appropriate when retailers handle seasonal goods that must be sold at a reduced price after the selling season. For manufacturing situations, it can arise when customized products are made and scrap rates are high. 18) Pick any three products that occupy both extremes and the midpoint of the one-period model continuum. Explain why the products occupy these positions and identify the ideal inventory model for determining the best order quantity or each. Answer: Examples will vary, but the pure single-period product should use a single-period model. The example demand not bound by any season may be ordered using EOQ, POQ or some other model. 20

21 19) Explain why in any given season, the one-period decision model may result in a poor choice for a stocking level? Answer: The one-period inventory models are appropriate when decision makers handle seasonal goods that must be sold at a reduced price after the selling season. The model is based on expected values, i.e., the probability of experiencing demand at a certain level, perhaps based on historical data. If the data are highly variable, then there is a chance that demand may be unusually high or low, particularly in a "fashion" setting. A design that catches the public's fancy may experience high demand that exceeds the stocking level and the retailer will stock out and fail to realize all the sales that might have been possible. Conversely, a dog of a design may leave the retailer with excess inventory on the shelves. If this stocking game is played season after season, profit will be maximized, but any one season may have a different outcome. 21

22 20) A newsstand is trying to determine how many bundles of newspapers to stock. For each bundle, the newsstand makes $20. However, they lose $5 per bundle if they do not sell. The following discrete probability distribution has been estimated for their daily demand. How many bundles should they stock? Demand (bundles) Probability Answer: More download links: operations management krajewski 11th edition test bank free download sample operations management processes and supply chains 11th edition solutions manual 22

23 test bank for operations management 10th edition by krajewski operations management processes and supply chains 10th edition test bank operations management: processes and supply chains test bank operations management krajewski 11th edition pdf operations management test bank krajewski operations management processes and supply chains 11th edition pdf download operations management processes and supply chains pdf 23