Supply Chain Management, 5e (Chopra/Meindl)
Chapter 13 Determining the Optimal Level of Product Availability
13.1 True/False Questions
1) The level of product availability is also referred to as the customer service level.
Answer: TRUE
Diff: 1
Topic: 13.1 The Importance of the Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
2) A supply chain can use a high level of product availability to improve its responsiveness and
attract customers.
Answer: TRUE
Diff: 2
Topic: 13.1 The Importance of the Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
3) A high level of product availability requires less inventory, which will keep costs down for the
supply chain.
Answer: FALSE
Diff: 2
Topic: 13.1 The Importance of the Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
4) A supply chain needs to achieve a balance between the level of availability and the cost of
inventory that maximizes supply chain revenues.
Answer: FALSE
Diff: 3
Topic: 13.1 The Importance of the Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
5) Whether the optimal level of availability is high or low depends on where a particular
company believes they can maximize profits.
Answer: TRUE
Diff: 2
Topic: 13.1 The Importance of the Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
13-1
, 6) The cost of overselling is denoted by Co and is the loss incurred by a firm for each unsold unit
at the end of the selling season.
Answer: FALSE
Diff: 1
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
7) The cost of understocking is denoted by Cu and is the margin lost by a firm for each lost sale
because there is no inventory on hand.
Answer: TRUE
Diff: 2
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
8) The cost of underselling is a key factor that influences the optimal level of product
availability.
Answer: FALSE
Diff: 2
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
9) The costs of overstocking and understocking have a direct impact on both the optimal cycle
service level and profitability.
Answer: TRUE
Diff: 1
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
10) As the ratio of the cost of overstocking to the cost of understocking gets smaller, the optimal
level of product availability decreases.
Answer: FALSE
Diff: 3
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
11) With reduced demand uncertainty, a supply chain manager can better match supply and
demand by reducing both overstocking and understocking.
Answer: TRUE
Diff: 2
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
13-2
Chapter 13 Determining the Optimal Level of Product Availability
13.1 True/False Questions
1) The level of product availability is also referred to as the customer service level.
Answer: TRUE
Diff: 1
Topic: 13.1 The Importance of the Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
2) A supply chain can use a high level of product availability to improve its responsiveness and
attract customers.
Answer: TRUE
Diff: 2
Topic: 13.1 The Importance of the Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
3) A high level of product availability requires less inventory, which will keep costs down for the
supply chain.
Answer: FALSE
Diff: 2
Topic: 13.1 The Importance of the Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
4) A supply chain needs to achieve a balance between the level of availability and the cost of
inventory that maximizes supply chain revenues.
Answer: FALSE
Diff: 3
Topic: 13.1 The Importance of the Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
5) Whether the optimal level of availability is high or low depends on where a particular
company believes they can maximize profits.
Answer: TRUE
Diff: 2
Topic: 13.1 The Importance of the Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
13-1
, 6) The cost of overselling is denoted by Co and is the loss incurred by a firm for each unsold unit
at the end of the selling season.
Answer: FALSE
Diff: 1
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
7) The cost of understocking is denoted by Cu and is the margin lost by a firm for each lost sale
because there is no inventory on hand.
Answer: TRUE
Diff: 2
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
8) The cost of underselling is a key factor that influences the optimal level of product
availability.
Answer: FALSE
Diff: 2
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
9) The costs of overstocking and understocking have a direct impact on both the optimal cycle
service level and profitability.
Answer: TRUE
Diff: 1
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
Learning Outcome: Compare common approaches to supply chain design
10) As the ratio of the cost of overstocking to the cost of understocking gets smaller, the optimal
level of product availability decreases.
Answer: FALSE
Diff: 3
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
11) With reduced demand uncertainty, a supply chain manager can better match supply and
demand by reducing both overstocking and understocking.
Answer: TRUE
Diff: 2
Topic: 13.2 Factors Affecting Optimal Level of Product Availability
AACSB: Analytic Skills
Learning Outcome: Compare common approaches to supply chain design
13-2
