Which of the following items is mostly likely managed using a single-period order model

THE SINGLE-PERIOD INVENTORY MODEL

Some finished goods inventories have very short selling seasons. Items such as holiday decorations, Christmas trees, long-stemmed red roses, newspapers, and magazines are good examples. These products typically have a high value for a relatively short period; then the value diminishes dramatically to either zero or some minimum salvage value. For example, week-old newspapers are inexpensive compared to newspapers offering fresh news. The question is how many of these products you should order to maximize your expected profit.

Designed for use with products that are highly perishable.

The single-period model is designed for products that share the following characteristics:

• They are sold at their regular price only during a single time period.
• 
  Demand for these products is highly variable but follows a known probability distribution.
• Salvage value of these products is less than their original cost, so you lose money when they are sold for their salvage value.

The objective is to balance the gross profit generated by the sale of a unit with the cost incurred for each unit that is not sold until after the primary selling period has elapsed. When demand follows a discrete probability distribution, we can solve the problem using an ...

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Operations Management, 10e (Heizer/Render)

Chapter 12 Inventory Management

1) According to the global company profile, Amazon.com's advantage in inventory management comes

from its almost fanatical use of economic order quantity and safety stock calculations.

Answer: FALSE

Diff: 1

Topic: Global company profile

Objective: no LO

2) A major challenge in inventory management is to maintain a balance between inventory investment

and customer service.

Answer: TRUE

Diff: 1

Topic: The importance of inventory

Objective: no LO

3) Which item to order and with which supplier the order should be placed are the two fundamental

issues in inventory management.

Answer: FALSE

Diff: 2

Topic: The importance of inventory

Objective: no LO

4) One function of inventory is to take advantage of quantity discounts.

Answer: TRUE

Diff: 1

Topic: Functions of inventory

Objective: no LO

5) Work-in-process inventory is devoted to maintenance, repair, and operations.

Answer: FALSE

Diff: 1

Topic: Functions of inventory

Objective: no LO

6) ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities

used.

Answer: FALSE

Diff: 1

Topic: Managing inventory

Objective: LO12-1

7) In ABC analysis, "A" Items are the most tightly controlled.

Answer: TRUE

Diff: 2

Topic: Managing inventory

Objective: LO12-1

78) Suppose that a newspaper stand is operating under the following conditions; paperscost $.4, have no salvage value, and sell for $.80.If the salvage value is increased by $.1,what is the increase in service level?

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Diff: 2Topic:Single-period modelAACSB:Analytic SkillsObjective:LO12-779) Service level isA) the chance of stocking outB) the chance of not stocking outC) something that should be minimized in retailD) calculated as the cost of a shortage divided by (the cost of overage+the cost ofshortage) for single-period modelsE) B and DAnswer:EDiff: 2

Topic:Single-period modelObjective:LO12-780) A bakery wants to determine how many trays of doughnuts it should prepare each day.Demand is normal with a mean of 5 trays and standard deviation of 1 tray.If the ownerwants a service level of at least 95% how many trays should he prepare (round to thenearest whole tray)? Assume doughnuts have no salvage value after the day is complete.Diff: 2

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Topic:Single-period modelAACSB:Analytic SkillsObjective:LO12-7