OMGT Final Exam Study Guide | Operations & Supply Chain Management Review, Key
Concepts & Practice Questions
A local barbecue joint makes one massive batch of potato salad each day. If they run out of this
savory side before the end of the day, their last few customers are less than satisfied, but if they
make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of
$0.23 to make, but can be sold for $1.50 to customers and for $0.08 to the hog farmer. The
average daily demand is for 200 servings with a standard deviation of 20 servings. How many
servings should be made each day?
a. 220
b. 225
c. 230
d. 235 - ANS ✔✔B
Supply chain inventory:
a. increases in cost as materials move downstream.
b. decreases in value as materials progress downstream.
c. increases in flexibility as materials progress upstream.
d. is governed by the bullwhip effect, which says a small change downstream can cause a large
change upstream. - ANS ✔✔A
The inventory that companies hold to protect themselves against uncertainties in either
demand or replenishment time is called:
a. safety stock.
b. anticipation inventory.
c. hedge inventory.
d. smoothing inventory. - ANS ✔✔A
,Individual links in the supply chain can stabilize their production at the most efficient level by
using:
a. safety stock.
b. anticipation inventory.
c. linkage inventory
d. smoothing inventory. - ANS ✔✔D
The mismatch between timing of customer demand and supply chain lead times is what drives
the need for:
a. safety stock.
b. anticipation inventory.
c. cycle stock.
d. hedge inventory. - ANS ✔✔B
The factory produces product and ships it to the distributor. The distributor sends it to the
wholesaler when they receive an order. The wholesaler ships the product to the retailer as the
retailer requests replenishment. The customer visits the retailer's bricks and mortar store to
purchase the product when they run out. Which of these supply chain members is most likely
subjected to the greatest variability in customer demand?
a. retailer
b. wholesaler
c. distributor
d. factory - ANS ✔✔D
Tata Motors assembles cars from their own parts and subassemblies and also controls the
mining and fabrication of the materials used to create those parts. When Anand ordered their
luxury sedan with the platinum dashboard he knew he wouldn't be taking delivery of his dream
car the next week. Rather, he would be waiting a while thanks to:
a. a mismatch between supply chain lead time and customer demand.
,b. a mismatch between overall demand levels and productive capacity.
c. a mismatch between demand and the most efficient production volume.
d. a mismatch between demand and the most efficient shipment volume. - ANS ✔✔A
Which of the following relationships shows dependent demand inventory?
a. A business purchases a new car when the old one wears out.
b. A tire maker buys cleaning supplies.
c. An automaker purchases four tires for each car they produce.
d. A winemaker buys grapes from farmers in the Columbia Valley. - ANS ✔✔C
The beef jerky driver shows up every Monday to take orders from his convenience store
customers. One fine Monday morning he stops in the Quik-E Mart and notes that there are only
three sticks on the shelves. Consulting his route sheet, he discovers that the restock level is 40.
The order quantity is therefore:
a. 3 sticks.
b. 37 sticks.
c. 40 sticks.
d. Cannot be determined with the information given. - ANS ✔✔B
A hospital's biomedical repair shop uses a 4-week periodic system to maintain the inventory on
the blood pressure cuff repair parts. They use an average 40 adult arm cuffs with a standard
deviation of 6 cuffs every four weeks. Cuffs aren't the most critical item they carry, but the
manager would like to avoid the embarrassment of a stockout at least 95% of the time. What
should their restocking level be?
a. 40 cuffs
b. 46 cuffs
c. 50 cuffs
d. 52 cuffs - ANS ✔✔C
, Inventory that is "in the pipeline" is:
a. anticipation inventory.
b. transportation inventory.
c. smoothing inventory.
d. hedge inventory. - ANS ✔✔B
Which of these conditions is NOT necessary for the economic order quantity model to be valid?
a. The item has a constant demand.
b. The item has a constant lead time.
c. The item has a constant price.
d. The item has a constant safety stock. - ANS ✔✔D
The cashier waved the can of golden hominy across the holographic bar code reader and it
emitted a piercing beep. At the same time the customer's bill was rising, the grocery store's
inventory was automatically being reduced by 1 can of golden hominy down to 3 cans. This was
the bare minimum amount of hominy the store manager dared carry in inventory, so the
computer system automatically sent a message to the hominy man, who loaded a few cases
onto his delivery truck for tomorrow morning's trip to replenish the store. This is a classic
example of:
a. a periodic review system.
b. safety stock.
c. a continuous review system.
d. cycle stock. - ANS ✔✔C
If demand increases by 100%, the average inventory held in a system governed by the EOQ
model:
a. is increased 100%.
Concepts & Practice Questions
A local barbecue joint makes one massive batch of potato salad each day. If they run out of this
savory side before the end of the day, their last few customers are less than satisfied, but if they
make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of
$0.23 to make, but can be sold for $1.50 to customers and for $0.08 to the hog farmer. The
average daily demand is for 200 servings with a standard deviation of 20 servings. How many
servings should be made each day?
a. 220
b. 225
c. 230
d. 235 - ANS ✔✔B
Supply chain inventory:
a. increases in cost as materials move downstream.
b. decreases in value as materials progress downstream.
c. increases in flexibility as materials progress upstream.
d. is governed by the bullwhip effect, which says a small change downstream can cause a large
change upstream. - ANS ✔✔A
The inventory that companies hold to protect themselves against uncertainties in either
demand or replenishment time is called:
a. safety stock.
b. anticipation inventory.
c. hedge inventory.
d. smoothing inventory. - ANS ✔✔A
,Individual links in the supply chain can stabilize their production at the most efficient level by
using:
a. safety stock.
b. anticipation inventory.
c. linkage inventory
d. smoothing inventory. - ANS ✔✔D
The mismatch between timing of customer demand and supply chain lead times is what drives
the need for:
a. safety stock.
b. anticipation inventory.
c. cycle stock.
d. hedge inventory. - ANS ✔✔B
The factory produces product and ships it to the distributor. The distributor sends it to the
wholesaler when they receive an order. The wholesaler ships the product to the retailer as the
retailer requests replenishment. The customer visits the retailer's bricks and mortar store to
purchase the product when they run out. Which of these supply chain members is most likely
subjected to the greatest variability in customer demand?
a. retailer
b. wholesaler
c. distributor
d. factory - ANS ✔✔D
Tata Motors assembles cars from their own parts and subassemblies and also controls the
mining and fabrication of the materials used to create those parts. When Anand ordered their
luxury sedan with the platinum dashboard he knew he wouldn't be taking delivery of his dream
car the next week. Rather, he would be waiting a while thanks to:
a. a mismatch between supply chain lead time and customer demand.
,b. a mismatch between overall demand levels and productive capacity.
c. a mismatch between demand and the most efficient production volume.
d. a mismatch between demand and the most efficient shipment volume. - ANS ✔✔A
Which of the following relationships shows dependent demand inventory?
a. A business purchases a new car when the old one wears out.
b. A tire maker buys cleaning supplies.
c. An automaker purchases four tires for each car they produce.
d. A winemaker buys grapes from farmers in the Columbia Valley. - ANS ✔✔C
The beef jerky driver shows up every Monday to take orders from his convenience store
customers. One fine Monday morning he stops in the Quik-E Mart and notes that there are only
three sticks on the shelves. Consulting his route sheet, he discovers that the restock level is 40.
The order quantity is therefore:
a. 3 sticks.
b. 37 sticks.
c. 40 sticks.
d. Cannot be determined with the information given. - ANS ✔✔B
A hospital's biomedical repair shop uses a 4-week periodic system to maintain the inventory on
the blood pressure cuff repair parts. They use an average 40 adult arm cuffs with a standard
deviation of 6 cuffs every four weeks. Cuffs aren't the most critical item they carry, but the
manager would like to avoid the embarrassment of a stockout at least 95% of the time. What
should their restocking level be?
a. 40 cuffs
b. 46 cuffs
c. 50 cuffs
d. 52 cuffs - ANS ✔✔C
, Inventory that is "in the pipeline" is:
a. anticipation inventory.
b. transportation inventory.
c. smoothing inventory.
d. hedge inventory. - ANS ✔✔B
Which of these conditions is NOT necessary for the economic order quantity model to be valid?
a. The item has a constant demand.
b. The item has a constant lead time.
c. The item has a constant price.
d. The item has a constant safety stock. - ANS ✔✔D
The cashier waved the can of golden hominy across the holographic bar code reader and it
emitted a piercing beep. At the same time the customer's bill was rising, the grocery store's
inventory was automatically being reduced by 1 can of golden hominy down to 3 cans. This was
the bare minimum amount of hominy the store manager dared carry in inventory, so the
computer system automatically sent a message to the hominy man, who loaded a few cases
onto his delivery truck for tomorrow morning's trip to replenish the store. This is a classic
example of:
a. a periodic review system.
b. safety stock.
c. a continuous review system.
d. cycle stock. - ANS ✔✔C
If demand increases by 100%, the average inventory held in a system governed by the EOQ
model:
a. is increased 100%.
