Test #2 - T/F questions

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Created by: Lida Paz
  1. A lot or batch size is the quantity that a stage of the supply chain either produces or purchases at a given time
  2. Cycle inventory is the physical inventory in the supply chain due to either production or purchases demanded by the customer.
  3. The inventory profile is a plot depicting the level of inventory over time.
  4. When demand is steady, average cycle inventory and lot size are related as follows:Average Cycle Inventory = Lot Size x 2 = Q*2
  5. Average flow time resulting from cycle inventory = Cycle Inventory/Demand = Q/2D.
  6. Increasing the lot size or cycle inventory often decreases the cost incurred by different stages of a supply chain.
  7. 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.
  8. Lot sizes and cycle inventory do not affect the flow time of material within the supply chain
  9. Increasing the lot size or cycle inventory often decreases the cost incurred by different stages of a supply chain
  10. The costs considered in lot sizing decisions include material cost, fixed ordering cost, and manufacturing cost
  11. 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.
  12. The optimal lot size is referred to as the economic order quantity (EOQ). It is denoted by Q * and is given by the equation: Q* = 2DS/hC.
  13. Total ordering and holding costs are unstable around the economic order quantity.
  14. A firm is often better served by ordering a convenient lot size close to the economic order quantity rather than the precise EOQ.
  15. If demand increases by a factor of k, the optimal lot size decreases by a factor of k.
  16. To reduce the optimal lot size by a factor of k, the fixed order cost S must be reduced by a factor of k.
  17. 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.
  18. A key to reducing cycle inventory is the reduction of lot size.
  19. Reduction of fixed cost may be achieved by aggregating lots across multiple products, customers, or suppliers.
  20. A key to reducing lot size without increasing costs is to reduce the holding cost associated with each lot.
  21. Lot sizes and cycle inventory do not affect the flow time of material within the supply chain.

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