Deck 11: Managing the Merchandise Planning Process

Question 1

Assortment, or depth, of a merchandise category is the number of different merchandising subcategories offered.

Answer 1

False
The assortment, or depth, of merchandise is the number of SKUs within a subcategory.

Question 2

The highest classification level in a buying organization is the

A) order point.
B) buying group.
C) stock-keeping unit.
D) merchandise group.
E) department.

Answer 2

D
The highest classification level is the merchandise group.

Question 3

A ________ is a group of items targeting the same customer type, such as girls' sizes 4 to 6.

A) stock-keeping unit
B) department
C) merchandise group
D) classification
E) merchandise category

Answer 3

D
The classification is the third level for categorizing merchandise and organizing merchandise management activities. A classification is a group of items targeting the same customer type, such as girls' sizes 4 to 6.

Question 4

Shorter lead times result in a higher level of backup stock required to maintain the same level of product availability.

Question 5

In marketing research, an in-depth interview is an unstructured personal interview in which the interviewer uses extensive probing to get individual respondents to talk in detail about a subject.

Question 6

Seasonal merchandise consists of items whose sales fluctuate dramatically depending on the time of the year.

Question 7

Which of the following schemes is the correct order describing the levels of the merchandise classification scheme from the highest level to the lowest level?

A) Department-Merchandise Group-Classification-Category-stock-keeping unit (SKU)
B) Merchandise Group-Classification-Department-Category-SKU
C) Merchandise Group-Department-Classification-Category-SKU
D) Classification-Department-Category-Merchandise Group-SKU
E) Category-Classification-Merchandise Group-Department-SKU

Question 8

Buyers, divisional merchandise managers, and general merchandise managers are some of those who undertake the responsibilities of merchandise management.

Question 9

Which of the following products is an example of a classification?

A) Sweaters
B) Infant apparel
C) Polo shirts
D) Shoes
E) Formal shirts

Question 10

Buyers need not compromise on breadth or depth of merchandise to increase product availability.

Question 11

An ABC analysis identifies the performance of individual SKUs in the assortment plan.

Question 12

The quantity of merchandise has a bigger impact on profitability than allocation decisions.

Question 13

Which of the following statements is True of a merchandise category?

A) It is the basic unit of analysis for merchandising decisions.
B) It is the smallest unit available for keeping inventory.
C) It is the unit of inventory least affected by seasonal trends.
D) It is the largest unit available for keeping inventory.
E) It is an assortment of complementary SKUs.

Question 14

Which of the following statements is not True of the merchandise classification scheme?

A) A stock-keeping unit (SKU) is the smallest unit available for inventory control.
B) In soft goods, a SKU usually means a particular size, color, and style.
C) SKUs are the basic units of analysis for making merchandising management decisions.
D) The highest classification level is the merchandise group.
E) A classification is a group of items targeting the same customer type.

Question 15

A retailer's merchandise group is managed by a

A) divisional merchandise manager (DMM).
B) general merchandise manager (GMM).
C) buyer.
D) category captain.
E) category manager.

Question 16

Which of the following is the process by which a retailer attempts to offer the appropriate quantity of the right merchandise, in the right place, and at the right time, while meeting the company's financial goals?

A) Category management
B) Quick response inventory management
C) Merchandise management
D) Inventory control
E) Materials procurement and handling

Question 17

Fashion merchandise consists of items that are in continuous demand over an extended time period.

Question 18

Which of the following statements is not True of a department in the merchandise classification scheme?

A) It is the second level in the merchandise classification scheme.
B) It is at a lower level than the merchandise group in the merchandise classification scheme.
C) It is a level higher than classification in the merchandise classification scheme.
D) The DMM, who manages the department, is responsible for several merchandise classifications.
E) It is managed by a general merchandise manager (GMM).

Question 19

The second highest level in the merchandise classification structure is the

A) stock-keeping unit.
B) category.
C) department.
D) merchandise group.
E) classification.

Question 20

The highest classification level in the buying organization is the merchandise category.

Question 21

Which of the following products is not an example of a stock-keeping unit (SKU)?

A) Size 12, white, full sleeve, Ralph Lauren shirts
B) Teen necklaces with matching bracelets and rings
C) Queen-size Sealy mattress with extra back support and Scotch Guard
D) No-ad sunscreen, SPF 50 in 50-ounce squeeze-top dispenser
E) V-8 vegetable juice in 32-ounce can

Question 22

Which of the following is not True of a fashion merchandise category?

A) It consists of items that are only in demand for a relatively short period of time.
B) New products are continually introduced into these categories.
C) The introduction of new products makes the existing products obsolete.
D) The change of colors and styles can make the basic product fashion merchandise.
E) Forecasting sales for this category is simplistic and predictable.

Question 23

Smart Wash is a popular brand of detergent powder. The stock needs to be continuously replenished in stores and supermarkets due to its high demand. The detergent powder belongs to the category of

A) expected merchandise.
B) sample merchandise.
C) staple merchandise.
D) seasonal merchandise.
E) fashion merchandise.

Question 24

A(n) ________ is the smallest unit available for inventory control.

A) category
B) stock-keeping unit
C) classification
D) merchandise group
E) assortment

Question 25

Which of the following is not True of staple merchandise categories?

A) They consist of items that are in continuous demand over an extended time period.
B) The number of new product introductions in these categories is limited.
C) The demand for these categories is predictable.
D) Because their sales are relatively steady from day-to-day, a periodic inventory system is used.
E) Merchandise planning systems for these categories focus on continuous replenishment.

Question 26

Which of the following is not True of category management?

A) Managing merchandise within a category by brand can lead to inefficiencies because it fails to consider the interdependencies between SKUs in the category.
B) The category management approach to managing breakfast cereals in supermarkets should have one buyer or category manager who oversees all merchandising activities for the entire category.
C) A category manager ensures that the store's assortment includes the "best" combination of sizes and vendors.
D) A category manager chooses vendors that will get the most profit from the allocated space.
E) A category manager is also called a category captain and works with vendors to get the most profit from collaborative relationships.

Question 27

________ categories consist of items whose sales fluctuate dramatically depending on the time of year.

A) Expected merchandise
B) Sample merchandise
C) Staple merchandise
D) Seasonal merchandise
E) General merchandise

Question 28

Which of the following statements is not a potential problem with appointing vendors as category captains?

A) Appointing vendors as category captains makes merchandise management tasks difficult for retailers.
B) Vendors could take advantage of their position by suggesting an assortment plan that includes most of its SKUs and exclude other SKUs that contribute more so to the retailer's profitability.
C) The vendor category captain could collude with the retailer to fix prices.
D) The vendor category captain could block other brands from access to shelf space.
E) The dependence on the vendor category captain may cause a retailer to miss opportunity for increasing margins through their private-label SKUs.

Question 29

________ consist of items that are only in demand for a relatively short period of time.

A) Expected merchandise categories
B) Sample merchandise categories
C) Staple merchandise categories
D) General merchandise categories
E) Fashion merchandise categories

Question 30

When there is a high inventory turnover, there is an increase in sales because

A) price points are set higher to accommodate for potential sales loss.
B) new merchandise is continually available to customers.
C) the merchandise begins to look shopworn.
D) sales are increased by reducing prices.
E) more money is available to buy new merchandise.

Question 31

Why are vendors in a better position to manage a category than a smaller retailer?

A) Retailers manage brands more often than categories.
B) Retailers managing merchandise groups have little experience with categories.
C) Vendors have superior information through their focus on a specific category.
D) Vendors work to manage higher sales within their companies.
E) Retailers are traditionally poor category managers.

Question 32

What is the drawback of utilizing category captains?

A) The vendor category captain could take advantage of their position and maximize their own sales.
B) Retailers tend to ignore recommendations of the category captain.
C) Retailers take advantage of the information and misuse it.
D) Retailers can take advantage of their position and minimize competing brands.
E) Vendor category captains are not in a good position when compared to retailers to manage a category.

Question 33

Which of the following persons is a vendor who forms an alliance with a retailer to help gain consumer insight, satisfy customer needs, and improve performance and profit across a category?

A) Assortment supervisor
B) Category captain
C) Category manager
D) Category specialist
E) Consumer advocate

Question 34

Which of the following is not a benefit of a high inventory turnover?

A) Continuous availability of new merchandise
B) Improved salesperson morale
C) Reduced obsolescence risk and markdowns
D) New buying opportunities
E) Reduced gross margin

Question 35

Which of the following is an example of staple merchandise?

A) The latest style of denim jeans
B) Luggage
C) Flannel sheets
D) Platform shoes
E) Men's black socks

Question 36

A ________ is the basic unit of analysis for making merchandise management decisions.

A) department
B) stock-keeping unit
C) classification
D) merchandise group
E) merchandise category

Question 37

Merchandise like men's crew socks, canned peas, college ruled loose leaf paper, and 60-watt light bulbs would be considered ________ that are in continuous demand over an extended time period.

A) expected merchandise
B) sample merchandise
C) staple merchandise
D) seasonal merchandise
E) fashion merchandise

Question 38

Which of the following statements holds True for the purchase of staple merchandise?

A) Buyers often do not reorder additional merchandise after placing the first order.
B) Buyers for staple merchandise categories have much less flexibility in correcting forecasting errors.
C) Staple merchandise is purchased using a continuous replenishment system by monitoring sales and generating replacement orders.
D) The staple merchandise buying system requires more experienced buyers.
E) The main objective of staple merchandise buying is to be as close to out of stock as possible.

Question 39

A performance measure which assesses a buyer's contribution to ROA is called the

A) cost plus pricing.
B) gross margin.
C) gross margin return on investment.
D) net profit.
E) break-even point.

Question 40

Which of the following is a result of high inventory turnover?

A) Improved employee morale
B) A decrease in the cost of goods sold
C) An increase in promotions and markdowns
D) Higher risk of product obsolescence
E) A decrease in profits

Question 41

What is the first step in merchandise management planning?

A) Developing a forecast for sales
B) Executing a merchandise plan
C) Developing a business plan
D) Determining the appropriate inventory levels
E) Penetrating a new market

Question 42

Which of the following statements about assortment is not True?

A) The number of SKUs offered in a merchandise category is a strategic decision.
B) The breadth and depth of the assortment in a merchandise category can affect the retailer's brand image.
C) Offering a large assortment normally simplifies a customer's buying decision.
D) Customer perceptions on assortments are based on the availability of the customer's favorite SKU and the size of the category's display.
E) Buyers need to consider the degree to which categories in a department complement each other.

Question 43

________ of a merchandise category is the number of different merchandising subcategories offered.

A) Merchandise depth
B) Classification
C) Variety
D) Assortment
E) Merchandise mixture

Question 44

Garden rakes, lawn mowers, and sunscreen would be considered part of a(n) ________ category.

A) expected merchandise
B) sample merchandise
C) staple merchandise
D) seasonal merchandise
E) fashion merchandise

Question 45

________ of a retailer's merchandise is the number of SKUs within a subcategory.

A) Merchandise breadth
B) Horizontal integration
C) Variety
D) Assortment
E) Merchandise mixture

Question 46

A(n) ________ is a small group of respondents interviewed by a moderator using a loosely structured format in which participants are encouraged to express their views and comment on the views of others in the group.

A) focus group
B) ethnic group
C) demogroup
D) customer advisory council
E) online research community

Question 47

Which of the following best describes variety?

A) Product availability
B) Inventory that results from a replenishment process
C) The percentage of demand for a particular SKU that is satisfied
D) The number of SKUs in a store
E) The number of different merchandising subcategories within a store

Question 48

Which of the following merchandise systems focuses on staying as close to out of stock as possible?

A) Fashion merchandise management system
B) Assortment driven management system
C) Historical precedence management system
D) Staple merchandise management system
E) Allocated space management system

Question 49

Which of the following statements does not describe the relationship between product availability and stock level?

A) The higher the product availability, the greater the amount of backup stock.
B) More backup stock is needed in the model stock plan if a retailer wants to increase product availability.
C) The quantity of backup stock is fixed by a retailer and is not influenced by product availability.
D) If the product availability gets too high, scarce financial resources will be wasted on needless inventory that could be more profitably invested in increasing variety or assortment.
E) A very high level of product availability results in a prohibitively high inventory investment.

Question 50

Which of the following is True of the forecasting approach for staple merchandise categories?

A) Buyers need to find out what customers are going to want in the future.
B) Forecasts are typically based on extrapolating historical sales.
C) Buyers for these categories rely heavily upon forecast services.
D) Buyers for these categories conduct focus group studies to find out consumers' opinions.
E) Buyers for these categories depend upon category sales forecasts which vendors provide.

Question 51

Which of the following merchandise categories is purchased in a manner similar to fashion merchandise?

A) Promotional merchandise
B) Sample merchandise
C) Staple merchandise
D) Seasonal merchandise
E) Expected merchandise

Question 52

Father Christmas is a retail store that sells a unique Santa made from fur, wool, and tapestry. The store does not sell any other product. Therefore, the store has little

A) category.
B) assortment.
C) medley.
D) merchandise mixtures.
E) variety.

Question 53

The ________ is the number of each SKU in the assortment plan that the buyer wants to have available for purchase in each store.

A) merchandise budget plan
B) order point
C) assortment plan
D) model stock plan
E) stock-to-sales ratio

Question 54

Which of the following statements does not describe the trade-offs that buyers should consider for merchandise assortment planning?

A) Increasing sales by offering more breadth and depth can potentially reduce inventory turnover.
B) Increasing sales by offering more breadth and depth can potentially reduce GMROI by having more stock-keeping units (SKUs).
C) Increasing breadth and depth can increase the need to put more merchandise on sale and thus negatively affect the gross margin.
D) SKU rationalization programs can help in increasing inventory turnover without reducing sales.
E) The more SKUs offered, greater the chance of breaking sizes-running out of a specific size SKU.

Question 55

Which of the following terms is defined as the percentage of demand for a particular SKU that is satisfied?

A) Assortment
B) Economic order quantity
C) Merchandise mix
D) Product availability
E) Variety

Question 56

________ is also referred to as the level of support or service level.

A) Product assortment
B) Product availability
C) Product satisfaction
D) Product depth
E) Product breadth

Question 57

Which of the following is not True of fashion merchandise categories?

A) Forecasting the sales for fashion merchandise categories is more challenging than forecasting for staple goods.
B) Buyers for fashion merchandise categories have a high degree of flexibility in correcting forecasting errors.
C) They have a short life cycle.
D) Buyers often do not have a chance to reorder additional merchandise after an initial order is placed.
E) New products are continuously being introduced.

Question 58

Which of the following factors does not contribute to the increase of buffer stock levels?

A) The high service level that a retailer tries to achieve
B) High fluctuations in demand
C) Long lead time for delivery from the vendor
D) Fluctuations in vendor lead time
E) Frequent store deliveries

Question 59

Which of the following processes is an unstructured form of personal questioning used in market research and involves extensive probing to get individual respondents to talk in detail about a subject?

A) Coolhunting
B) Crowd manipulation
C) Focus group interview
D) In-depth interview
E) Showrooming

Question 60

Father Christmas is a retail store that sells a unique Santa made from fur, wool, and tapestry. If 150 customers wish to buy a Santa from this store, and it sells 120 before running out of stock, what is its service level?

A) 15 percent
B) 80 percent
C) 20 percent
D) 85 percent
E) 88 percent

Question 61

Since sales and the arrival of merchandise from vendors can't be predicted with perfect accuracy, retailers have to carry

A) backup stock.
B) basic merchandise.
C) perpetual inventory.
D) cycle stock.
E) base stock.

Question 62

Retailers often find the 80-20 principle evident within the ABC analysis. What does the 80-20 principle imply?

A) About 20 percent of a retailer's sales promotion sells 80 percent of its inventory.
B) Approximately 20 percent of a retailer's sales come from 80 percent of its products.
C) Approximately 80 percent of a retailer's inventory was sold, and 20 percent was wasted.
D) 80 percent of the retailer's customers are repeat customers and only 20 percent are new.
E) Approximately 80 percent of a retailer's sales come from 20 percent of its products.

Question 63

After developing a plan and allocating the merchandise, the next step in the merchandise planning process involves

A) replenishing the inventory levels.
B) planning for the following season.
C) analyzing the performance and making adjustments.
D) discussing buybacks with the vendors.
E) penetration of new markets.

Question 64

A(n) ________ indicates the decision variables set by the buyer, such as product availability, the backup stock needed to provide the product availability, and the order points and quantities.

A) inventory management report
B) sell-through analysis
C) periodic inventory control system
D) perpetual inventory control system
E) automatic ordering report

Question 65

The percentage of SKUs received complete on a particular order from a vendor is called the

A) product availability.
B) order rate.
C) fill rate.
D) service level.
E) delivery rate.

Question 66

Which of the following factors is considered by retailers in making merchandise allocation and promotion decisions specific to difficult economic times?

A) Shrinkage
B) Paycheck cycle
C) Buffer stock
D) Backup stock
E) Fill rate

Question 67

________ refers to inventory for which the level goes up and down in response to the replenishment process.

A) Cycle stock
B) Backup stock
C) Basic stock
D) Perpetual inventory
E) Order point

Question 68

The retailer's information system determines the ________ by comparing the sales made through the POS terminals with the shipments received by the store.

A) perpetual inventory
B) order point
C) buffer stock
D) cycle stock
E) fill rate

Question 69

The merchandise budget plan

A) is used to keep track of the actual merchandise flows.
B) specifies the level of inventory needed to support the sales.
C) compares actual and planned sales to determine whether more merchandise is needed.
D) identifies the performance of individual SKUs in the assortment plan.
E) uses a weighted-average score for each vendor.

Question 70

A catalog retailer of kitchen items observes that during some weeks it sells 40 muffin pans, and during other weeks it sells none. A reorder takes up to three weeks. The probability of running out of pans and alienating its customers can be alleviated by maintaining

A) non-ledgered stock.
B) cycle stock.
C) hidden inventory.
D) backup stock.
E) lead stock.

Question 71

Which of the following is not a factor that determines the level of required backup stock?

A) The product availability the retailer wishes to provide
B) Fluctuations in demand
C) Lead time for delivery from the vendor
D) Fluctuations in vendor lead time
E) Price of the product

Question 72

Which of the following statements does not describe the approach that deals with cycle (base) stock?

A) A retailer tries to reduce the base stock to keep its inventory investment low.
B) One approach for reducing the base stock is to reorder and receive merchandise from the vendor more often.
C) Frequent orderings with smaller quantities will reduce transportation costs.
D) Shorter delivery time from the vendor will reduce the level of base stock.
E) Shorter lead time from the vendor will reduce the level of base stock.

Question 73

In staple merchandise management systems, the ________ is the amount of inventory below which the quantity available shouldn't go or the item will be out of stock before the next order arrives.

A) service level
B) order point
C) base stock
D) perpetual inventory
E) average inventory

Question 74

A(n) ________ is used to keep track of the actual merchandise flows-what the present inventory level is, when purchased merchandise is scheduled for delivery, and how much has been sold to customers.

A) model stock plan
B) fashion-oriented bookkeeping
C) open-to-buy system
D) order point
E) perpetual inventory

Question 75

Which of the following analysis techniques compares actual and planned sales to determine whether more merchandise is needed to satisfy demand or whether price reductions are required?

A) Sell-through analysis
B) GMROI
C) ABC analysis
D) Inventory turnover analysis
E) Multiattribute analysis

Question 76

After developing a plan for managing merchandise within a category, the next step in the merchandise management process is to

A) allocate the merchandise to the stores.
B) make the purchase.
C) order through vendors.
D) re-evaluate the plan using last year's plan.
E) penetrate new markets.

Question 77

________ is the amount of time between the recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale.

A) Lead time
B) Order time
C) Fill rate
D) Service level
E) Delivery rate

Question 78

An open-to-buy system compares

A) a store's perpetual inventory and order point quantity.
B) the amount of merchandise in dollars and the sales forecast.
C) the planned and actual end-of-month inventory.
D) annual sales and backup stock required for merchandise categories.
E) the assortment plan and the projected sales volume.

Question 79

A(n) ________ identifies the performance of individual SKUs in the assortment plan.

A) product rating system
B) sell-through analysis
C) inventory turnover ranking
D) GMROI
E) ABC analysis

Question 80

Retail chains typically classify each of their stores on the basis of annual sales. According to this classification,

A) A stores would have the largest sales volume.
B) C stores would receive the highest inventory.
C) B items represent 65 percent of SKUs in a category.
D) C items contribute to 20 percent of sales.
E) B items require the highest amount of backup stock.