5. Which of these statements about cycle inventory is most accurate? A) Changing

ID: 352526 • Letter: 5

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5. Which of these statements about cycle inventory is most accurate? A) Changing the lead time for an item has no direct effect on cycle inventory (B) Cycle inventory should be larger when demand is uncertairn. (C) Cycle inventory should be smaller when demand is uncertain. D Shorter average time between orders means average cycle inventory should be higher. (E) I t there is no pipeline inventory, then cycle inventory must be at its maximum level. ou use the EOQ model for inventory management. If setup cost for orders decreases, what should you do, and w (A) Don't do anything, because the setup cost has no direct effect on inventory holding cost. (B) Increase the order size, because the lower cost per order means you can accept more holding cost. (C) Decrease the order size, because the lower cost per order means you can order more frequently. (D) Increase the order size, because the lower cost per order means you can order more frequently (E) Decrease the order size, because the lower cost per order means you can accept more holding o one moment yesterday they had 36 boxes in the warehouse and they placed an order, which will be delivered tomorrow. Since that moment 32 boxes were delivered to customers from the warehouse. What is the current inventory position? 7. A firm sells boxes and usesa

Explanation / Answer

C) answer is C. Cycle stock is the avg inventory held by a company to meet customer demand by the time next lot of order arrives. In an uncertain demand having a huge cycle stock can make the firm vulnerable to losses. Suppose you hold 500 units of Product A in your cycle stock on average, however, the demand of it diminishes due to certain uncertainties. You would be at a complete loss.

6) C , EOQ is directly proportional to setup cost. As set-up cost reduces, optimal order quantity reduces (Order size reduces) as you can order more frequently. Suppose you need 120 units in a year and you ordered 12 units in a month. However, setup cost is halved so you can order 6 units in 15 days (or 6 units twice a month).

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5. Which of these statements about cycle inventory is most accurate? A) Changing

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