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Chapter 10
Managing Economies of Scale in the Supply Chain: Cycle Inventory
True/False
1. Cycle inventory exists because producing or purchasing in large lots allows a
stage of the supply chain to exploit economies of scale and increase cost.
Answer: False
Difficulty: Moderate
2. A lot or batch size is the quantity that a stage of the supply chain either produces
or purchases at a given time.
Answer: True
Difficulty: Moderate
3. Cycle inventory is the physical inventory in the supply chain due to either
production or purchases demanded by the customer.
Answer: True
Difficulty: Moderate
4. The inventory profile is a plot depicting the level of inventory over time.
Answer: True
Difficulty: Easy
5. When demand is steady, cycle inventory and lot size are related as follows:
Cycle Inventory = Lot Size x 2 = Q*2.
Answer: False
Difficulty: Moderate
6. Lot sizes and cycle inventory do not affect the flow time of material within the
supply chain.
Answer: False
Difficulty: Easy
7. Average flow time resulting from cycle inventory = Cycle Inventory/Demand =
Q/2D.
Answer: True
Difficulty: Moderate
8. Cycle inventory is primarily held to take advantage of economies of scale and
reduce profit within the supply chain.
Answer: False
Difficulty: Easy
9. Increasing the lot size or cycle inventory often decreases the cost incurred by
different stages of a supply chain.
Answer: True
Difficulty: Moderate
10. Cycle inventory exists in a supply chain because different stages exploit
economies of scale to lower total cost.
Answer: True
Difficulty: Easy
11. The costs considere
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