Supply Chain Management, 6e, Global Edition (Chopra/Meindl)
Chapter 13 Determining the Optimal Level of Product Availability
13.1 True/False Questions
1) 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
AACSB: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
2) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
3) 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: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
4) 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
AACSB: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
1
Copyright © 2016 Pearson Education, Ltd.
,5) 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: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
6) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
7) 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
AACSB: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
8) 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
AACSB: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
9) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
2
Copyright © 2016 Pearson Education, Ltd.
, 10) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
11) An increase in forecast accuracy increases both the overstocked and understocked quantity
and decreases a firm's profits.
Answer: FALSE
Diff: 1
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.2: Use managerial levers that improve supply chain profitability.
12) If quick response allows multiple orders in the season, profits increase and the overstock
quantity increases.
Answer: FALSE
Diff: 3
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.2: Use managerial levers that improve supply chain profitability.
13) Quick response results in the manufacturer making a lower profit in the short term if all else
is unchanged.
Answer: TRUE
Diff: 3
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.2: Use managerial levers that improve supply chain profitability.
14) Postponement is valuable for a firm that sells a large variety of products with demand that is
independent and comparable in size.
Answer: TRUE
Diff: 2
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.3: Understand conditions under which postponement is valuable in a supply
chain.
3
Copyright © 2016 Pearson Education, Ltd.
Chapter 13 Determining the Optimal Level of Product Availability
13.1 True/False Questions
1) 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
AACSB: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
2) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
3) 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: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
4) 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
AACSB: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
1
Copyright © 2016 Pearson Education, Ltd.
,5) 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: Application of knowledge
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
6) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
7) 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
AACSB: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
8) 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
AACSB: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
9) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
2
Copyright © 2016 Pearson Education, Ltd.
, 10) 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: Analytical thinking
Objective: LO 13.1: Identify factors affecting the optimal level of product availability and
evaluate the optimal cycle service level.
11) An increase in forecast accuracy increases both the overstocked and understocked quantity
and decreases a firm's profits.
Answer: FALSE
Diff: 1
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.2: Use managerial levers that improve supply chain profitability.
12) If quick response allows multiple orders in the season, profits increase and the overstock
quantity increases.
Answer: FALSE
Diff: 3
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.2: Use managerial levers that improve supply chain profitability.
13) Quick response results in the manufacturer making a lower profit in the short term if all else
is unchanged.
Answer: TRUE
Diff: 3
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.2: Use managerial levers that improve supply chain profitability.
14) Postponement is valuable for a firm that sells a large variety of products with demand that is
independent and comparable in size.
Answer: TRUE
Diff: 2
Topic: 13.3 Managerial Levers to Improve Supply Chain Profitability
AACSB: Analytical thinking
Objective: LO 13.3: Understand conditions under which postponement is valuable in a supply
chain.
3
Copyright © 2016 Pearson Education, Ltd.
