What is the primary reason for holding MRO inventory?
Explanation
Maintenance, Repair, and Operating (MRO) inventory is essential for ensuring the smooth operation of a facility. It includes all the items, from lightbulbs to spare machine parts, needed to maintain equipment and support production, even though they are not part of the final product.
Other questions
What is the primary objective of inventory management?
Which of the following is NOT considered one of the four main types of inventory?
ABC analysis is a method for dividing on-hand inventory into three classifications based on what criterion?
Sharp, Inc., has an annual demand of 1,000 hypodermic needles. The setup or ordering cost is 10 dollars per order, and the holding cost is 0.50 dollars per unit per year. What is the optimal number of units to order (EOQ)?
What is the primary purpose of cycle counting?
In the context of inventory management, what does the term 'shrinkage' refer to?
Which of the following is an assumption of the basic Economic Order Quantity (EOQ) model?
A refuse truck builder has 500 Class A items, 1,750 Class B items, and 2,750 Class C items. The company policy is to count A items every month (20 working days), B items every quarter (60 working days), and C items every 6 months (120 working days). How many total items should be counted per day?
The term for the time between the placement and receipt of an order is known as what?
An Apple store has an annual demand of 8,000 iPhones and operates 250 days a year. Delivery of an order takes 3 working days. What is the reorder point (ROP) without safety stock?
The production order quantity model is applicable in which of the following situations?
A benefit of the EOQ model is that it is 'robust'. What does this mean?
Nathan Manufacturing has an annual demand of 1,000 hubcaps, setup costs of 10 dollars, and holding cost of 0.50 dollars per unit per year. The daily production rate is 8 units and daily demand is 4 units. What is the production order quantity?
What is the major trade-off that management must consider when evaluating quantity discounts?
In a probabilistic inventory model, what is the service level?
Chris Ellis’s newsstand sells the Washington Post. He pays 70 cents per paper and sells them for 1.25 dollars. He receives a 30-cent credit for unsold papers. What is the service level he should aim for in this single-period model?
What is a key difference between a fixed-quantity (Q) system and a fixed-period (P) system?
A hospital stocks a resuscitation kit with a mean demand during lead time of 350 kits and a standard deviation of 10 kits. The administrator wants a service level that results in stockouts only 5 percent of the time. How much safety stock should the hospital maintain? (Z for 95 percent = 1.645)
A chip manufacturer has 10 inventory items. Two items, #10286 and #11526, account for 72 percent of the total annual dollar volume. According to ABC analysis, how should these two items be classified?
The average daily demand for Lenovo laptops at a Circuit Town store is 15, with a standard deviation of 5 units. The lead time is constant at 2 days. What is the reorder point (ROP) needed for a 90 percent service level? (Z for 90 percent = 1.28)
One of the functions of inventory is to decouple various parts of the production process. What does this mean?
What type of inventory consists of products or components that are no longer raw materials but have yet to become finished products?
A hotel housekeeper was observed five times on four task elements. For the task 'Make one bed', the observations were 2.3, 2.5, 2.1, 2.2, and 2.4 minutes, with a performance rating of 90 percent. Assuming a 10 percent allowance factor, what is the standard time for this task?
What is the primary function of safety stock?
A Circuit Town store sells about 10 digital cameras a day. Lead time is normally distributed with a mean of 6 days and a standard deviation of 1 day. To maintain a 98 percent service level (Z = 2.055), what should the reorder point be?
A system that keeps track of each withdrawal or addition to inventory continuously so records are always current is known as what?
What are the three categories of costs that are evaluated to determine inventory holding costs, as listed in Table 12.1?
For a single-period inventory model, how is the cost of overage (Co) calculated?
A store's average daily demand for batteries is 150 packs, with a standard deviation of 16 packs. The lead time is normally distributed with an average of 5 days and a standard deviation of 1 day. To maintain a 95 percent service level (Z = 1.645), what is the appropriate reorder point?
In ABC analysis, Class C items, despite making up a large percentage of the total number of inventory items, typically account for what percentage of the annual dollar volume?
If a company's annual demand is 1,000 units and the optimal order quantity (Q*) is 200 units, how many orders are expected to be placed during the year?
A manager of a store that is open 250 days a year determines they need to place 5 orders per year. What is the expected time between orders?
In a quantity discount model, which step should be taken first to find the optimal order quantity?
An inventory system where orders are placed at the end of a given period, and the amount ordered brings the total inventory up to a prespecified target level, is called a:
A firm has an annual demand of 1,000 units, ordering cost of 10 dollars, and holding cost of 0.50 dollars per unit. The cost of the material is 10 dollars per unit. What is the total annual cost including the purchase cost?
In the context of the material flow cycle, what does the text suggest about the percentage of time that work is in-process but not productive?
If management underestimates total annual demand by 50 percent (demand is 1,500 instead of 1,000) but continues to use the EOQ for 1,000 units (Q=200), what is the impact on total annual inventory cost, according to Example 6?
Which of the following policies is NOT a valid approach based on ABC analysis?
David Rivera Optical has a reorder point of 50 frames. The annual carrying cost is 5 dollars per frame, and the stockout cost is 40 dollars per frame. The firm places 6 orders per year. If there is a 20 percent probability of demand being 60 frames during lead time (a shortage of 10), and a 10 percent probability of demand being 70 (a shortage of 20), what is the stockout cost for a policy of zero safety stock?
What is a major disadvantage of a fixed-period (P) inventory system?
In a chip manufacturer's ABC analysis, what percentage of the total number of items stocked is typically represented by Class B items?
What does a stockout risk of 42.2 percent imply for a business using a single-period inventory model?
Which factor makes the production order quantity (Qp*) larger than the economic order quantity (Q*) for the same item?
What is the total annual ordering and holding cost for Sharp, Inc., if annual demand is 1,200 units, ordering cost is 10 dollars, and holding cost is 0.50 dollars? (EOQ for D=1200 is 219 units)
A hospital needs to determine safety stock for a specific item. Demand during lead time is normally distributed with a mean of 80 and a standard deviation of 7. If management can tolerate stockouts 10 percent of the time (Z = 1.28), what should the safety stock be?
A company has an annual demand of 8,000 transistors, a carrying cost of 3 dollars per transistor, and an ordering cost of 30 dollars per order. The company operates 200 days a year. What is the expected time between orders?
A surgery pack has a constant weekly demand of 60 units. The lead time is variable, with a mean of 6 weeks and a standard deviation of 2 weeks. For a 90 percent service level (Z = 1.28), what is the reorder point?
The EOQ formula is Q* = sqrt(2DS/H). What happens to the optimal order quantity (Q*) if the ordering cost (S) doubles?
What is the primary advantage of a periodic (P) system over a perpetual (Q) system?