Problem sets

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Answer the following problem sets. Show ALL of your work on the
problem sets. Answer multiple choice questions by spelling out the answer (don’t use just the letter)

1. A store stocks beer mugs and the demand for these beer mugs is 10,200 per year. It costs $120 per
order of the mugs and it costs $1.35 per mug per year to keep the mugs in stock. Once an order is
placed, it takes seven days to receive the order from the distributor. Determine the following:
a. Optimal order size
b. Minimum total annual inventory cost
c. Reorder point

2. The Really Big Weapons Company was asked to bid on the barrel assembly for the 30 mm recoilless
rifle. The company estimates that it will take 10 hours to complete the 25th unit, and based on
historical data for similar barrel assemblies; an 85-percent learning curve is expected.

a. What is the expected average time for the first two units?

b. What is the approximate estimated time for the 100th unit?

3. A purchasing manager at a local manufacturing company was quoted an estimated time of 47 labor
hours to produce a prototype for a new product. The supplier also estimated the learning rate to fall
between 82 and 85 percent.

a. What percentage decrease should the purchasing manager expect in required manufacturing
by the fifth unit?

b. Suppose an expected decrease of approximately 37 percent over the first units was 30
percent. What should the purchasing manager infer about the suppliers efficiency?

Multiple choice:

1. __________ is often the most costly and time-consuming component of purchasing management.

A. Negotiating
B. Bidding
C. Transportation
D. Analyzing
E. Organizing

2. __________ involves facilitating the movements of raw materials and component parts from suppliers through the firm’s manufacturing process to the ultimate customers.

A. Production
B. Processing
C. Production management
D. Process management
E. Transportation

3. The initial (transportation) decision requires the __________ firm to select the appropriate shipment mode.

A. buying
B. selling
C. shipping
D. freight
E. trucking

4. Each of the (transportation) modes has specific operating and cost characteristics and the buying professional must weigh them in selecting the most appropriate transportation mode. The most basic selection decision is the trade-off between __________.

A. quality, flexibility, and price
B. cost, flexibility, and speed
C. flexibility, reliability, and speed
D. cost, reliability, and speed
E. efficiency, cost, and speed

5. In many cases, most Fortune 500 firms use a variety of transportation modes depending on their aggregate transportation needs. The “model split” is usually determined by cost pressures, the packaging, the final shipment destination, and competitive trucking firms.

A. True
B. False

6. Deregulation has allowed the railroad carriers to integrate into __________.

A. more competitive markets
B. other markets
C. other modes of transportation
D. more competitive rates
E. more diverse markets

7. __________ the trucking industry has dramatically changed not only the outcome of the industry but also how it operates.

A. Federal deregulation of
B. State regulation of
C. Competitive rates in
D. Centralized management of
E. State deregulation of

8. The __________ industry is composed of a large number of for-hire and private carriers. The for-hire category includes both regulated carriers and non-regulated carriers.

A. railroad
B. express
C. airline
D. barge
E. trucking
9. General commodity carriers usually specialize in either truckload (TL) or less-than-truckload (LTL) operations. Truckload shipments are defined by the ICC as loads in excess of 10,000 pounds. Currently, there are more than 40,000 small truckload carriers. These companies have been typically __________.

A. moderately priced and highly organized
B. low-cost and nonunion
C. low-cost and unionized
D. high priced and nonunion
E. reliable and low-cost
10. Another special ICC category is the parcel delivery service and limited shipment size category. __________ is the largest carrier in this sector.

A. UPS
B. FedEx
C. DHL
D. USPS
E. UES

11. Rail transportation is generally less expensive than air and truck modes. Rail cargo is usually shipped from terminal to terminal; therefore, flexibility is not an attribute.

A. True
B. False

12. The truck mode is used to transport a variety of perishable consumer goods, such as fresh meats, frozen meats, dairy products, baked goods, and beverages. The primary advantages of this mode are __________.

A. reliability and low cost
B. flexibility and versatility
C. low cost and versatility
D. flexibility and low cost
E. on time delivery and low cost

13. The competition in the trucking industry is fierce, so in order to be successful, a carrier must provide the shipper with __________.

A. low costs and flexibility
B. reliability and high service
C. versatility and flexibility
D. high service and low costs
E. reliability and low costs
14. These average prices are misleading when selecting one mode over another. However, it is safe to suggest that, in general, __________ rates are lower than __________ rates on small shipments and on high-valued commodities.

A. air; truck
B. water; rail
C. truck; rail
D. truck; water
E. air; rail

15. In contrast, in long-haul volume movements of bulk commodities, __________ are typically unable to quote __________ rates.

A. air carriers; motor-competitive
B. water carriers; air-competitive
C. truckers; air-competitive
D. motor carriers; rail-competitive
E. rail carriers; truck-competitive
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