Chapter 11 Testbank

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Chapter 11 - Testbank
Global Supply Chain Management (Vrije Universiteit Amsterdam)
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Supply Chain Management, 6e, Global Edition (Chopra/Meindl)

Chapter 11 Managing Economies of Scale in the Supply Chain: Cycle Inventory
11.1 True/False Questions
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
Diff: 2
Topic: 11.1 The Role of Cycle Inventory in a Supply Chain
AACSB: Analytical thinking
Objective: LO 11.1: Balance the appropriate costs to choose the optimal lot size and cycle
inventory in a supply chain.
2) Cycle inventory is the physical inventory in the supply chain due to either production or
purchases demanded by the customer.
Answer: TRUE
Diff: 2
3) Lot sizes and cycle inventory do not affect the flow time of material within the supply chain.
Answer: FALSE
Diff: 1
4) Average flow time resulting from cycle inventory = Cycle Inventory/Demand = Q/2D.
Answer: TRUE
Diff: 2
5) Cycle inventory is primarily held to take advantage of economies of scale and reduce profit
within the supply chain.
Answer: FALSE
Diff: 1
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6) Cycle inventory exists in a supply chain because different stages exploit economies of scale to
lower total cost.
Answer: TRUE
Diff: 1
7) The costs considered in lot sizing decisions include material cost, fixed ordering cost, and
manufacturing cost.
Answer: FALSE
Diff: 2
Topic: 11.2 Estimating Cycle Inventory-Related Costs in Practice
8) A firm is often better served by ordering a convenient lot size close to the economic order
quantity rather than the precise EOQ.
Answer: TRUE
Diff: 2
Topic: 11.3 Economies of Scale to Exploit Fixed Costs
9) To reduce the optimal lot size by a factor of k, the fixed order cost S must be reduced by a
factor of k.
Answer: FALSE
Diff: 2
10) Aggregating across products, retailers, or suppliers in a single order allows for a reduction in
lot size for individual products because fixed ordering and transportation costs are now spread
across multiple products, retailers, or suppliers.
Answer: TRUE
Diff: 2
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11) A key to reducing cycle inventory is the reduction of lot size.

Answer: TRUE
Diff: 1
12) Reduction of fixed cost may be achieved by aggregating lots across multiple products,
customers, or suppliers.
Answer: TRUE
Diff: 1
13) A discount is volume-based if the pricing schedule offers discounts based on the quantity
ordered in a single lot.
Answer: FALSE
Diff: 3
Topic: 11.5 Economies of Scale to Exploit Quantity Discounts
Objective: LO 11.2: Understand the impact of quantity discounts on lot size and cycle inventory.
14) Pricing schedules with all unit quantity discounts encourage retailers to increase the size of
their lots, which reduces the average inventory and flow time in a supply chain.
Answer: FALSE
Diff: 2
Objective: LO 11.3: Devise appropriate discounting schemes for a supply chain.
15) Marginal unit quantity discounts have also been referred to as multi-block tariffs.
Answer: TRUE
Diff: 2
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16) For commodity products where price is set by the market, manufacturers can use lot size
based quantity discounts to achieve coordination in the supply chain and decrease supply chain
cost.
Answer: TRUE
Diff: 2
17) The supply chain profit is higher if each stage of the supply chain independently makes its
pricing decisions with the objective of maximizing its own profit.
Answer: FALSE
Diff: 2
18) For products where the firm has market power, two-part tariffs can be used to achieve
coordination in the supply chain and maximize supply chain profits.
Answer: TRUE
Diff: 2
AACSB: Application of knowledge
19) Price discrimination is the practice where a firm charges differential prices to maximize
profits.
Answer: TRUE
Diff: 1
20) Although a forward buy is often the retailer's appropriate response and increases their own
profits, it usually increases demand variability with a resulting increase in inventory and flow
times within the supply chain.
Answer: TRUE
Diff: 2
Topic: 11.6 Short-Term Discounting: Trade Promotions
Objective: LO 11.4: Understand the impact of trade promotions on lot size and cycle inventory.
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11.2 Multiple Choice Questions
1) Cycle inventory exists because producing or purchasing in large lots allows a stage of the
supply chain to
A) exploit economies of scale and raise cost.
B) exploit economies of scale and lower cost.
C) exploit customers and lower cost.
D) exploit customers and raise cost.
Answer: B
Diff: 1
2) The quantity of inventory that a stage of the supply chain either produces or purchases at a
given time is
A) an order.
B) a job.
C) a shipment.
D) a lot or batch.
Answer: D
Diff: 1
3) The average inventory in the supply chain due to either production or purchases in lot sizes
that are larger than those demanded by the customer is
A) annual inventory.
B) distribution inventory.
C) cycle inventory.
D) physical inventory.
Answer: C
Diff: 2
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4) A graphical plot depicting the level of inventory over time is

A) an inventory graph.
B) a distribution inventory.
C) an inventory drawing.
D) an inventory profile.
Answer: D
Diff: 2
5) When demand is steady, cycle inventory and lot size are related as
A) Cycle Inventory = Lot Size × 2.
B) Cycle Inventory = Q*2.
C) Cycle Inventory = Q/2.
D) Cycle Inventory = Lot Size = Q.
Answer: C
Diff: 2
6) Average flow time resulting from cycle inventory is equal to

A) Cycle Inventory/Demand = Q/2.
B) Cycle Inventory/Demand = Q/2D.
C) Cycle Inventory = Q/2.
D) Cycle Inventory = Lot Size = Q.
Answer: B
Diff: 2
7) Cycle inventory is primarily held to

A) take advantage of diseconomies of scale and increase cost within the supply chain.
B) take advantage of diseconomies of scale and reduce cost within the supply chain.
C) take advantage of economies of scale and increase cost within the supply chain.
D) take advantage of economies of scale and reduce cost within the supply chain.
Answer: D
Diff: 2
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8) The primary role of cycle inventory is to allow different stages in the supply chain to
A) purchase product in lot sizes that maximize the sum of the material, ordering, and holding
cost.
B) purchase product in lot sizes that minimize the sum of the material, ordering, and holding
cost.
C) sell product in lot sizes that maximize the sum of the material, ordering, and holding cost.
D) sell product in lot sizes that minimize the sum of the material, ordering, and holding cost.
Answer: B
Diff: 2
9) Economies of scale in purchasing and ordering motivate a manager to

A) increase the lot size and cycle inventory.
B) decrease the lot size and cycle inventory.
C) eliminate inventory.
D) increase the lot size and reduce cycle inventory.
Answer: A
Diff: 2
10) The price paid per unit is referred to as

A) the material cost and is denoted by C.
B) the fixed ordering cost and is denoted by S.
C) the holding cost and is denoted by H.
D) the purchase price and is denoted by P.
Answer: A
Diff: 2
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11) All costs that do not vary with the size of the order but are incurred each time an order is
placed are referred to as
A) the material cost and are denoted by C.
B) the fixed ordering cost and are denoted by S.
C) the holding cost and are denoted by H.
D) the purchase price and are denoted by P.
Answer: B
Diff: 2
12) The cost of carrying one unit in inventory for a specified period of time, usually one year, is
referred to as
A) the material cost and is denoted by C.
B) the fixed ordering cost and is denoted by S.
C) the holding cost and is denoted by H.
D) the purchase price and is denoted by P.
Answer: C
Diff: 2
13) Ordering costs would include which of the following?

A) Cost from theft
B) Transportation cost
C) Security cost
D) Damage cost
Answer: B
Diff: 2
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14) Inventory holding costs would include which of the following?

A) Transportation cost
B) Buyer time
C) Obsolescence cost
D) Receiving cost
Answer: C
Diff: 2
15) Total ordering and holding costs

A) are relatively stable.
B) are relatively stable around the economic order quantity.
C) are relatively unstable around the economic order quantity.
D) are unstable.
Answer: B
Diff: 1
Scenario 11.1 - Bubble and Squeak
The rising popularity of bubble and squeak as a breakfast item on the menu has resulted in a
steady demand for peas. Over the course of the past week, 457 patrons have ordered the hearty
breakfast and each serving contains a half cup of English peas. It costs two cents to hold a half
cup of peas in inventory for a year and $3 to place an order (remember they come all the way
from England!). It takes two weeks to ship a container from England loaded with peas.
16) What is the optimal order quantity?

A) 2670 cups
B) 17.8 cups
C) 1335 cups
D) 8.9 cups
Answer: C
Diff: 2
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17) What is the average inventory if they order at the optimal order quantity?
A) 2670 cups
B) 2000 cups
C) 1335 cups
D) 667 cups
Answer: D
Diff: 2
18) What is the cost of the inventory policy (excluding cost of goods) if the diner orders at the
economic order quantity?
A) $53.40
B) $106.80
C) $26.70
D) $80.10
Answer: A
Diff: 3
19) How many orders per year does the diner place if they order at the economic order quantity?
A) 18
B) 9
C) 5
D) 14
Answer: B
Diff: 3
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20) What is the average flow time of a half cup of peas if the diner orders at the economic order
quantity?
A) 8.76 weeks
B) 5.84 weeks
C) 2.92 weeks
D) 11.68 weeks
Answer: C
Diff: 3
21) The diner orders at the economic order quantity but an analysis of dates on the cans of peas
revealed that the flow time was actually 5 weeks. A quick check revealed that the computer had
automatically adjusted up the economic order quantity as demand had risen during the past few
months. What is the new weekly demand for English peas?
A) 234 half cups
B) 78 half cups
C) 312 half cups
D) 156 half cups
Answer: D
Diff: 3
22) If demand increases by a factor of k, the optimal lot size increases by a factor of
A) k.
B) k/2.
C) k-squared.
D) the square root of k.
Answer: D
Diff: 3
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Scenario 11.2 - S&H Mercantile
The S&H Mercantile in Luther is the only game in town for a number of items, and tries
valiantly to use only the storage space needed to display items since there is no stock room in the
back of the store. One popular item, a 16-ounce can of dehydrated water, takes up 20 square
inches of shelf space. The shelf space available for this item measures five feet by four feet. The
store manager would like to order a quantity that can fill the shelf space without stacking and
without needing to store cans elsewhere in the store. The amount ordered should all be on display
once the S&H runs out and ideally would arrive just as the last can is purchased.
23) Suppose the annual demand is 8,000 units and the cost per can is $3 with a holding cost of
10%. What is the required order cost per lot?
A) 32 cents
B) $3.20
C) $32
D) $1.44
Answer: A
Diff: 3
24) Drought conditions spike demand during the summer to an annualized rate of 27,000 cans
per year and the price rises to $12 per can with a holding cost of 20%. What is the required order
cost per lot?
A) 9.2 cents
B) 92 cents
C) $9.20
D) $92.00
Answer: B
Diff: 3
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25) Drought conditions spike demand during the summer to an annualized rate of 27,000 cans
per year and the price rises to $12 per can. If the ordering cost per lot is 75 cents, what is the
holding cost percentage?
A) 3.1%
B) 1.81%
C) 31%
D) 18.1%
Answer: C
Diff: 3
26) Aggregating across products, retailers, or suppliers in a single order allows for
A) an increase in lot size for individual products.
B) an increase in customer demand.
C) a reduction in holding cost per unit.
D) a reduction in lot size for individual products.
Answer: D
Diff: 3
Scenario 11.3 - Sammy's Sammwiches
Sammy's is the hot new lunch spot among the hipsters, who flock there at noon for their artisanal
peanut butter and jelly sandwiches, which sell for $12.95. The sandwiches are made from two
slices of their own artisanal bread, which they bake continuously throughout the day at a rate of
seven loaves an hour (each loaf contains twenty slices). The actual cost of a loaf of bread is $1
and the cost to hold a loaf is 80%, since freshness is important in baking as well as to hipsters.
The cost to run a new batch of a dough is $3 per loaf. Sammy's sells their sandwiches at a rate of
fifty per hour.
27) What is the optimal batch size to produce?

A) 8.36 loaves
B) 1.8 loaves
C) 5.56 slices
D) 8.36 slices
Answer: C
Diff: 3
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28) What is the cost to run Sammy's at the economic production lot size?
A) $5.46
B) $2.73
C) $1.36
D) $0.68
Answer: B
Diff: 3
29) Aggregating across products, retailers, or suppliers in a single order allows for a reduction in
lot size for individual products because
A) fixed ordering and transportation costs are now charged to retailers.
B) fixed ordering and transportation costs are now charged to suppliers.
C) fixed ordering and transportation costs are now spread across multiple products, retailers, or
suppliers.
D) holding costs are now charged to retailers or suppliers.
Answer: C
Diff: 2
30) A key to reducing cycle inventory is

A) the reduction of holding cost.
B) the reduction of manufacturing cost.
C) the reduction of lot size.
D) the reduction of warehouse space.
Answer: C
Diff: 2
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31) A key to reducing lot size without increasing costs is to

A) reduce the holding cost associated with each lot.
B) reduce the fixed cost associated with each lot.
C) reduce the material cost associated with each lot.
D) reduce the manufacturing cost associated with each lot.
Answer: B
Diff: 2
32) A price discount where the pricing schedule offers discounts based on the quantity ordered in
a single lot is
A) customer based.
B) lot size based.
C) supplier based.
D) volume based.
Answer: B
Diff: 1
33) A price discount where the discount is based on the total quantity purchased over a given
period, regardless of the number of lots purchased over that period, is
A) customer based.
B) lot size based.
C) supplier based.
D) volume based.
Answer: D
Diff: 2
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34) Pricing schedules with all unit quantity discounts encourage retailers to
A) decrease the size of their lots.
B) increase the size of their lots.
C) decrease the size of their inventory.
D) increase the price of their products.
Answer: A
Diff: 1
35) In the pricing schedule for marginal unit quantity discounts,

A) the average cost of a unit decreases at a breakpoint.
B) the average cost of a unit increases at a breakpoint.
C) the marginal cost of a unit decreases at a breakpoint.
D) the marginal cost of a unit increases at a breakpoint.
Answer: C
Diff: 2
36) Quantity discounts lead to

A) a significant buildup of cycle inventory in the supply chain.
B) a slight buildup of cycle inventory in the supply chain.
C) a decrease in cycle inventory in the supply chain.
D) minor fluctuations of cycle inventory in the supply chain.
Answer: A
Diff: 2
37) ________ is the practice whereby a firm charges differential prices to maximize profits.
A) Optimal lot sizing
B) Fixed pricing
C) Nonperishable pricing
D) Price discrimination
Answer: D
Diff: 2
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38) Trade promotions lead to a significant ________ in lot size and cycle inventory because of
forward buying by the ________.
A) decrease, retailer
B) increase, retailer
C) decrease, supplier
D) increase, supplier
Answer: B
Diff: 3
39) In a supply chain where each stage of the supply chain independently makes its pricing
decisions with the objective of maximizing its own profit,
A) supply chain profit is lower than a coordinated solution.
B) supply chain profit is higher than a coordinated solution.
C) supply chain profit is about the same as a coordinated solution.
D) supply chain profit will be maximized.
Answer: A
Diff: 1
40) For products where the firm has market power, coordination in the supply chain can be
achieved and supply chain profits maximized through the use of
A) two-part tariffs or volume based quantity discounts.
B) marginal unit quantity discounts.
C) all unit quantity discounts.
D) basic quantity discounts.
Answer: A
Diff: 1
41) The practice where a firm charges differential prices to maximize profits is
A) lot pricing.
B) marginal pricing.
C) price incrimination.
D) price discrimination.
Answer: D
Diff: 2
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42) Discounts related to price discrimination will be

A) volume based.
B) unit based.
C) marginally based.
D) lot size based.
Answer: A
Diff: 3
43) The goal of trade promotions is to

A) influence retailers to act in a way that helps the retailer achieve its objectives.
B) influence retailers to act in a way that helps the manufacturer achieve its objectives.
C) influence retailers to act in a way that will maximize supply chain profit.
D) influence retailers to act in a way minimize supply chain cost.
Answer: B
Diff: 3
44) The retailer can justify the forward buying when

A) they have inadvertently built up a lot of excess inventory.
B) the forward buy allows the manufacturer to smooth demand by shifting it from peak to low-
demand periods.
C) it decreases his total cost.
D) A and C only
Answer: C
Diff: 3
45) Replenishment orders in multi-echelon supply chains should be

A) synchronized to increase cycle inventory and order costs.
B) synchronized to facilitate supplier evaluation and selection.
C) synchronized to keep cycle inventory and order costs low.
D) separated to increase cycle inventory and order costs.
Answer: C
Diff: 3
Topic: 11.7 Managing Multiechelon Cycle Inventory
Objective: LO 11.5: Identify managerial levers that reduce lot size and cycle inventory in a
supply chain without increasing cost.
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Scenario 11.4 - Caffeine and Sugar
With a fixed cost of $100 per order, Nathan decided it was vital to get his money's worth. His
monthly demand for energy drinks was 10,000 bottles and holding cost was estimated at 20% of
unit cost. The mail order company offered him a couple of possibilities — he could pay $4.00
per bottle for orders of up to 10,000 bottles. After that threshold, he would pay only $3.98 per
bottle, and if he ordered 20,00 or more bottles in an order, he would pay only $3.96 per bottle.
46) What is the best order quantity for Nathan to use?

A) 5,477
B) 5,505
C) 10,000
D) 5,491
Answer: D
Diff: 3
47) What is the best total cost that Nathan can incur?
A) $488,644
B) $492,780
C) $493,720
D) $484,382
Answer: B
Diff: 3
48) Which cost takes into account the return demanded on the firm's equity and the amount the
firm must pay on its debt?
A) Cost of capital
B) Obsolescence (spoilage) cost
C) Handling cost
D) Occupancy cost
Answer: A
Diff: 1
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49) Which cost should only include receiving and storage costs that vary with the quantity of
product received?
A) Cost of capital
C) Handling cost
D) Occupancy cost
Answer: C
Diff: 2
50) Which cost should reflect the incremental change in space cost due to changing cycle
inventory?
A) Cost of capital
C) Handling cost
D) Occupancy cost
Answer: D
Diff: 2
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11.3 Essay Questions
1) Discuss the role of cycle inventory in the supply chain.

Answer: The primary role of cycle inventory is to allow different stages in the supply chain to
purchase product in lot sizes that minimize the sum of the material, ordering, and holding cost. If
a manager were considering the holding cost alone, he or she would reduce the lot size and cycle
inventory. Economies of scale in purchasing and ordering, however, motivate a manager to
increase the lot size and cycle inventory. A manager must make the trade-off that minimizes the
total cost when making the lot sizing decision. Ideally, cycle inventory decisions should be made
considering the total cost across the entire supply chain. In practice, however, each stage often
makes its cycle inventory decisions independently. As we discuss later in the chapter, this
practice increases the level of cycle inventory as well as the total cost in the supply chain.
Any stage of the supply chain exploits economies of scale in its replenishment decisions in the
following three typical situations:
1. A fixed cost is incurred each time an order is placed or produced.

2. The supplier offers price discounts based on the quantity purchased per lot.
3. The supplier offers short-term discounts or holds trade promotions.
Cycle inventory exists in a supply chain because different stages exploit economies of scale to
lower total cost. The costs considered include material cost, fixed ordering cost, and holding
cost. The supply chain operation phase operates on a weekly or daily time horizon and deals with
decisions concerning individual customer orders.
Diff: 3
AACSB: Reflective thinking
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2) Describe the impact of trade promotions on cycle inventory.

Answer: Manufacturers use trade promotions to offer a discounted price and a time period over
which the discount is effective. The goal of trade promotions is to influence retailers to act in a
way that helps the manufacturer achieve its objectives. A few of the key goals (from the
manufacturer's perspective) of a trade promotion are as follows:
1. Induce retailers to use price discounts, displays, or advertising to spur sales.
2. Shift inventory from the manufacturer to the retailer and the customer.
3. Defend a brand against competition.
In response to a trade promotion, the retailer has the following options:

1. Pass through some or all of the promotion to customers to spur sales.
2. Pass through very little of the promotion to customers but purchase in greater quantity during
the promotion period to exploit the temporary reduction in price.
The first action lowers the price of the product for the end customer, leading to increased
purchases and thus increased sales for the entire supply chain. The second action does not
increase purchases by the customer but increases the amount of inventory held at the retailer. As
a result, the cycle inventory and flow time within the supply chain increase.
Trade promotions lead to a significant increase in lot size and cycle inventory because of forward
buying by the retailer. This generally results in reduced supply chain profits unless the trade
promotion reduces demand fluctuations.
The retailer can justify the forward buying because it decreases his total cost. In contrast, the
manufacturer can justify this action only if they have either inadvertently built up a lot of excess
inventory or the forward buy allows the manufacturer to smooth demand by shifting it from peak
to low-demand periods. In practice, manufacturers often build up inventory in anticipation of
planned promotions. During the trade promotion, this inventory shifts to the retailer, primarily as
a forward buy. If the forward buy during trade promotions is a significant fraction of total sales,
manufacturers end up reducing the revenues they earn from sales because most of the product is
sold at a discount. The increase in inventory and the decrease in revenues often leads to a
reduction in manufacturer profits as a result of trade promotions. Total supply chain profits also
decrease because of an increase in inventory.
Diff: 3
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3) Discuss the characteristics of a successful multi-echelon supply chain.

Answer: For such a multi-echelon distribution supply chain, a good replenishment policy has the
following characteristics:
• All parties within a stage are divided into groups such that all parties within a group order
simultaneously from the same supplier.
• When a party receives a replenishment order, the receipt should be synchronized with the
shipment of a replenishment order to at least one of its customers. In other words, a portion of
any replenishment order at a stage should be cross-docked onto the next stage.
• If a customer replenishes less frequently than its supplier, the supplier replenishment
frequency should be an integer multiple of the customer replenishment frequency and
replenishment at both stages should be synchronized to facilitate cross-docking. In other words, a
supplier should cross-dock all orders from customers who reorder less frequently than the
supplier himself.
• If a customer replenishes more frequently than its supplier, the customer's replenishment
frequency should be an integer multiple of the supplier's replenishment frequency and
replenishment at both stages should be synchronized to facilitate cross-docking. In other words, a
supplier should cross-dock one out of every k shipments to a customer who orders more
frequently than himself, where k is an integer.
The relative frequency of reordering will depend upon the setup cost, holding cost, and demand
at different parties.
Replenishment orders in multi-echelon supply chains should be synchronized to keep cycle

inventory and order costs low. In general, each stage should attempt to coordinate orders from
customers who order less frequently and cross-dock all such orders. Some of the orders from
customers that order more frequently should also be cross-docked.
Diff: 3
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4) The XYZ Company has an assembly plant in Cincinnati and its parts plant in Indianapolis.
Parts are transported from Indianapolis to Cincinnati using trucks. Each shipment costs $100.
The Cincinnati plant assembles and sells 300 finished products each day and operates 50 weeks a
year. Part #456 costs $50 and XYZ Company incurs a holding cost of 20 percent per year. How
many of part #456 should XYZ Company put in each shipment? What is the cycle inventory of
part #456 at XYZ Company?
Answer:
Q =
=
= 1224.745 ≈ 1225
Average cycle inventory = Q*/2
= 1225/2
= 612.5
Diff: 2
5) Tastee Mart sells Frostee Flakes. Demand for Frostee Flakes is 500 boxes per week. Tastee
Mart has a holding cost of 30 percent and incurs a fixed cost of $100 for each replenishment
order it places for Frostee Flakes. Given that cost is $2 per box of Frostee Flakes, how much
should Tastee Mart order in each replenishment lot? If a trade promotion lowers the price of
Frostee Flakes to $1.80 for a month, how much should Tastee Mart order given the short-term
price reduction?
Answer:
Q* =
=
= 2943.92 ≈ 2944
Q d = (dD)/(C - d)h + CQ*/(C - d)
= (.2 × 26,000)/(2 - .2).3 + (2 × 2944)/(2 - .2)
= 12,900.74 ≈ 12,901
Forward buy = Qd - Q*
= 12,901 - 2944
= 9,957
Diff: 2
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Global Supply Chain Management (Vrije Universiteit Amsterdam)

Studocu is not sponsored or endorsed by any college or university

Supply Chain Management, 6e, Global Edition (Chopra/Meindl)

11.1 True/False Questions

Downloaded by Võ Ngân ([email protected])

Downloaded by Võ Ngân ([email protected])

11) A key to reducing cycle inventory is the reduction of lot size.

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Downloaded by Võ Ngân ([email protected])

11.2 Multiple Choice Questions

Downloaded by Võ Ngân ([email protected])

4) A graphical plot depicting the level of inventory over time is

6) Average flow time resulting from cycle inventory is equal to

7) Cycle inventory is primarily held to

Downloaded by Võ Ngân ([email protected])

9) Economies of scale in purchasing and ordering motivate a manager to

10) The price paid per unit is referred to as

Downloaded by Võ Ngân ([email protected])

13) Ordering costs would include which of the following?

Downloaded by Võ Ngân ([email protected])

14) Inventory holding costs would include which of the following?

15) Total ordering and holding costs

Scenario 11.1 - Bubble and Squeak

16) What is the optimal order quantity?

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Downloaded by Võ Ngân ([email protected])

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Scenario 11.2 - S&H Mercantile

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Scenario 11.3 - Sammy's Sammwiches

27) What is the optimal batch size to produce?

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30) A key to reducing cycle inventory is

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31) A key to reducing lot size without increasing costs is to

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35) In the pricing schedule for marginal unit quantity discounts,

36) Quantity discounts lead to

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42) Discounts related to price discrimination will be

43) The goal of trade promotions is to

44) The retailer can justify the forward buying when

45) Replenishment orders in multi-echelon supply chains should be

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Scenario 11.4 - Caffeine and Sugar

46) What is the best order quantity for Nathan to use?

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11.3 Essay Questions

1) Discuss the role of cycle inventory in the supply chain.

1. A fixed cost is incurred each time an order is placed or produced.

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2) Describe the impact of trade promotions on cycle inventory.

In response to a trade promotion, the retailer has the following options:

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3) Discuss the characteristics of a successful multi-echelon supply chain.

Replenishment orders in multi-echelon supply chains should be synchronized to keep cycle