False or True? Why?

1. Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management.

2. Variability in demand and/or lead time can be compensated for by safety stock.

3. A fixed order quantity/reorder point model for inventory control is usually used with temporary tracking.

4. Holding or carrying cost is directly proportional to order size, as order size increases, so does the holding cost.

Answer one of the following two questions

5. Average daily demand for a subcomponent during its lead time (Which is fixed at four days) is normally distributed with a mean of 15 units and a standard deviation of 2 units. Answer these questions, If the manager wants a service level of 97 percent during a lead time: a. How many subcomponents of safety stock should be held? b. What reorder point should be used?

6. A car rental agency uses 69 boxes of staples a year. The boxes cost $4 each. It costs $15 to order staples, and holding costs are $0.80 per box on an annual basis. Determine: a. the order quantity that will minimize the sum of ordering and holding boxes of staples b. the annual cost of ordering and carrying the boxes of staples