# Fiu Man4504 Exam 2 All Correct

## 1. A regional bookstore chain wants to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis?

assembly line balancing

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center-of-gravity method

linear programming

locational cost-volume analysis

## 2. A product has demand of4000 units per year. Ordering cost is \$20 and holding cost is \$4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost _____ per year in total annual inventory costs.

A) \$400

B) \$800

C) \$1200

D) Zero; this is a class C item.

E) Cannot be determined because unit price is not known.

## 3. Adding a complementary product to what is currently being produced is a demand management strategy used when:

demand exceeds capacity.

capacity exceeds demand for a product that has stable demand.

the existing product has seasonal or cyclical demand.

price increases have failed to bring about demand management.

efficiency exceeds 100 percent.

## 4. An inventory decision rule states, “When the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered.” Which of the following statements is TRUE?

One hundred is the reorder point, and 14 is the order quantity.

Fourteen is the reorder point, and 100 is the order quantity.

The number 100 is a function of demand during lead time.

Fourteen is the safety stock, and 100 is the reorder point.

None of the above is true.

Answer: Fourteen is the reorder point, and 100 is the order quantity.

Location

X-coordinate

Y-coordinate

Tonnage

Drop-off point A

1

8

10

Drop-off point B

6

7

35

Drop-off point C

6

2

25

Drop-off point D

4

7

50

(4.75, 6.04)

(17, 24)

(33.5, 135.4)

(6, 4.25)

(570, 725)

True

False

## 7. The purpose of safety stock is to:

replace failed units with good ones.

eliminate the possibility of a stockout.

eliminate the likelihood of a stockout due to erroneous inventory tally.

control the likelihood of a stockout due to variable demand and/or lead time.

protect the firm from a sudden decrease in demand.

Answer:control the likelihood of a stockout due to variable demand and/or lead time

True

False

True

False

## 10. FedEx chose Memphis, Tennessee, as its U.S. hub because:

the city is in the center of the United States, geographically.

the airport has relatively few hours of bad weather closures.

it needed a means to reach cities to which it did not have direct flights.

the firm believed that a hub system was superior to traditional city-to-city flight scheduling.

All of the above are true.

Answer: All of the above are true.

True

False

## 12. Which of the following would NOT generally be a motive for a firm to hold inventories?

to decouple various parts of the production process

to provide a selection of goods for anticipated customer demand and to separate the firm from fluctuations in that demand

to take advantage of quantity discounts

to minimize holding costs

to hedge against inflation

True

False

## 14. In location planning, environmental regulations, cost and availability of utilities, and taxes are:

global factors.

country factors.

regional/community factors.

site-related factors.

none of the above.

True

False

## 16. Holding costs are \$35 per unit per year, the ordering cost is \$120 per order, and sales are relatively constant at 300 per month. (a) What is the optimal order quantity? (b) What are the annual holding and setup costs?

order size is 540 and annual inventory costs are 158

order size is 751 and annual inventory costs are 5000

order size is 157 and annual inventory costs are 5499

none of the above

Answer:order size is 157 and annual inventory costs are 5499

True

False

True

False

True

False

## 20. Intangible costs include which of the following?

quality of prospective employees

quality of education

availability of public transportation

all of the above

none of the above

True

False

True

False

## 23. Currency risk is based on what assumption?

Firms that do not continuously innovate will lose market share.

Values of foreign currencies continually rise and fall in most countries.

Changing product lines by reacting to every current trend may alienate the customer base.

The value of one dollar today is greater than the value of one dollar to be received one year from now.

The U.S. stock market fluctuates daily.

Answer: Values of foreign currencies continually rise and fall in most countries.

## 24. Joe’s Camera shop has a favorite model that has annual sales of 145. The cost to place an order to replenish inventory is \$25 per order, and annual inventory holding cost per unit is \$20. Assume the store is open 350 days per year.

optimal order size = 19 units, N= 8 orders, optimal number of days between orders is 45.9 days, annual inventory cost= 380.79

optimal order size = 19 units, N= 9 orders, optimal number of days between orders is 59 days, annual inventory cost= 380.79

optimal order size = 11 units, N= 19 orders, optimal number of days between orders is 95 days, annual inventory cost= 190.40

none of the above

True

False

## 26. Which of the following statements regarding FedEx is TRUE?

Its hub in Memphis, Tennessee, was selected because of its low cost.

Memphis, Tennessee, is the only hub in the company’s global flight network.

FedEx believes the hub system helps reduce mishandling and delays due to better controls.

FedEx uses a hub system in the United States, but a city-to-city network in other countries.

Memphis is FedEx’s only hub airport in the United States.

Answer: Its hub in Memphis, Tennessee, was selected because of its low cost.

True

False

True

False

## 29. The proper quantity of safety stock is typically determined by:

using a single-period model.

carrying sufficient safety stock so as to eliminate all stockouts.

multiplying the EOQ by the desired service level.

setting the level of safety stock so that a given stockout risk is not exceeded.

minimizing total costs.

Answer:  setting the level of safety stock so that a given stockout risk is not exceeded.

True

False