20 2 resolve conflicts that can arise from the results of eoq and performance models 4302673

 

20.2   Resolve conflicts that can arise from the results of EOQ and performance models.

 

1) Goal-congruence problems may occur when an inconsistency evolves between the decision model used and the model used to evaluate the performance of the person implementing the decision.

 

2) If annual carrying costs are excluded when evaluating the performance of managers, the managers may favour purchasing in larger order quantities.

 

3) Companies can achieve significant gains by sharing information and coordinating activities throughout the supply chain.

4) When there is an inconsistency between the decision model and the model used to evaluate the performance of the person implementing the model, ________ arise.

A) evaluation point issues

B) goal-congruence issues

C) labour issues

D) performance issues

E) management issues

 

5) The possibility of a conflict between the order quantity that an EOQ model recommends and the order quantity that the purchasing manager regards as optimal is increased with

A) inventory costs which are computed with the FIFO method.

B) lower priced inventory items.

C) the absence of opportunity costs not being recorded in conventional accounting systems.

D) the absence of quality costs not being recorded in conventional accounting systems.

E) lower priced costs of goods sold.

6) Party Animals sells stuffed tigers. Products, Inc. manufactures all sorts of stuffed animals. Party Animals orders 10,400 tigers per year, 200 per week at $10 per tiger. The manufacturer covers all shipping costs. Party Animals earns 12% on its cash investments. The purchase order lead time is 3 weeks. Party Animals sells 210 tigers per week. The following data are available (based on management's estimates):

 

Estimated ordering costs per purchase order	$10
Estimated insurance, materials handling, breakage, and so on, per year	$3
Actual ordering costs per order	$15

 

What is the cost of the prediction error?

A) $19.58

B) $23.12

C) $1,144.82

D) $1,167.85

E) $1,237.92

 

20.3   Analyze the relevant benefits and costs of JIT alternatives.

 

1) Just-in-Time (JIT) Production is also called “lean production.”

 

2) Just-in-Time (JIT) Production is a system in which each component on a production line is produced immediately as needed by the next step in the production line.

3) The lack of buffer inventory in a demand-pull system means production staff has extra time to solve problems.

 

4) Financial performance measures are the predominant measures of control in a Just-in-Time system.