SOLVED

Section 5Â Â Probabilistic Models and Safety Stock 1) Service level is the complement of the probability of a stockout. 2) Safety stock in inventory systems depends only on the average demand during the lead time. 3) If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock? A) 8 units B) 10 units C) 16 units D) 64 units E) Cannot be determined without lead time data. 4) A specific product has demand during lead time of 100 units, with a standard deviation during lead time of 25 units. What safety stock (approximately) provides a 95% service level? A) 41 B) 55 C) 133 D) 140 E) 165 5) Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be? A) about 18 B) about 24 C) about 32 D) about 38 E) more than 40 6) The purpose of safety stock is to: A) replace failed units with good ones. B) eliminate the possibility of a stockout. C) eliminate the likelihood of a stockout due to erroneous inventory tally. D) control the likelihood of a stockout due to variable demand and/or lead time. E) protect the firm from a sudden decrease in demand. 7) The proper quantity of safety stock is typically determined by: A) using a single-period model. B) carrying sufficient safety stock so as to eliminate all stockouts. C) multiplying the EOQ by the desired service level. D) setting the level of safety stock so that a given stockout risk is not exceeded. E) minimizing total costs. 8) If demand is not uniform and constant, then stockout risks can be controlled by: A) increasing the EOQ. B) spreading annual demand over more frequent, but smaller, orders. C) raising the selling price to reduce demand. D) adding safety stock. E) reducing the reorder point. 9) If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, a 90 percent service level will require how much safety stock? A) 7 units B) 10 units C) 13 units D) 16 units E) 26 units 10) If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95 percent service requires how much safety stock? A) 28 units B) 30 units C) 49 units D) 59 units E) 114 units