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Chapter 10
Managing Econo mies of Scale in the Supply Chai n: Cycle Inven tory
True/False
1. Cycle inven tory exists because produci ng or purchas ing in large lots allows a stage of the supply cha in to exploit econo mies of scale and in crease cost. An swer: False
Difficulty: Moderate
2. A lot or batch size is the qua ntity that a stage of the supply cha in either produces or purchases at a give n time.
An swer: True
Difficulty: Moderate
3. Cycle inven tory is the physical inven tory in the supply cha in due to either product ion or purchases dema nded by the customer.
An swer: True
Difficulty: Moderate
4. The inven tory profile is a plot depict ing the level of inven tory over time.
An swer: True
Difficulty: Easy
5. Whe n dema nd is steady, cycle inven tory and lot size are related as follows: Cycle In ve ntory = Lot Size x 2 = Q*2.
An swer: False
Difficulty: Moderate
6. Lot sizes and cycle inven tory do not affect the flow time of material within the supply cha in.
An swer: False
Difficulty: Easy
7. Average flow time result ing from cycle inven tory = Cycle Inven tory/Dema nd = Q/2D.
An swer: True
Difficulty: Moderate
8. Cycle inven tory is primarily held to take adva ntage of econo mies of scale and reduce profit withi n the supply chai n.
An swer: False
Difficulty: Easy
9. In creas ing the lot size or cycle inven tory often decreases the cost in curred by differe nt stages of a supply cha in.10. Cycle inven tory exists in a supply cha in because differe nt stages exploit econo mies of scale to lower total cost.
An swer: True
Difficulty: Easy
11. The costs con sidered in lot siz ing decisi ons in clude material cost, fixed orderi ng cost, and manu facturi ng cost.
An swer: False
Difficulty: Moderate
12. The total annual cost is the sum of annual material cost, annual order cost, and annual holding cost, and is given as TC = CD + (D/Q)S + (Q/2) hC.
An swer: True Difficulty: Moderate
13. The optimal lot size is referred to as the econo mic order quantity (EOQ).
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