Deck 18: Managing Inventory

Question 1

In an ABC system of inventory control,________ is/are the measure of the relative importance of an item in the company's inventory.

A)dollar usage value
B)carrying costs
C)set-up costs
D)optimum inventory level

Answer 1

A

Question 2

A POS system can be set up for less than ________.

A)$1,000
B)$10,000
C)$5,000
D)$15,000

Answer 2

A

Question 3

The 80/20 rule suggests that business owners:

A)try to exercise control 80% of the time over 20% of their inventory.
B)identify those inventory items that represent the greatest value to the business and focus inventory control efforts on them.
C)focus on the 80% of their inventory that only produces 20% of their results in order to improve performance.
D)try to earn 20% more out of the 80% of their inventory that isn't producing.

Answer 3

B

Question 4

The purpose of ABC inventory analysis is:

A)to help retail stores control their inventories to prevent shoplifting and employee theft.
B)to save time by only inventorying those items that produce the majority of a firm's sales.
C)to focus inventory control efforts on items that account for the majority of sales.
D)a system to facilitate the computerization of a firm's perpetual inventory system.

Question 5

The ________ inventory control system relies on the validity of the 80/20 rule.

A)partial
B)perpetual
C)visual
D)ABC

Question 6

A ________ system performs all the functions of a traditional cash register and maintains an up-to-the minute inventory count.

A)POS
B)PCS
C)SPC
D)PCC

Question 7

The computerization of cash registers has:

A)completely eliminated the need for perpetual inventory systems.
B)eliminated the need for physical inventories.
C)overcome the disadvantages of ABC inventory systems but is too expensive for most small businesses.
D)overcome many of the disadvantages of perpetual inventory systems.

Question 8

The ________ method of inventory control is the least effective for ensuring accuracy and reliability and often leads to stockouts.

A)perpetual
B)ABC
C)partial
D)visual

Question 9

Items classified as "A" in ABC analysis should be controlled by a(n)________ inventory system.

A)periodic
B)perpetual
C)visual
D)ABC

Question 10

In ABC analysis,the dollar usage value of an item is determined by:

A)its price per unit times its shrinkage rate.
B)a statistical application of the 80/20 rule.
C)POS systems.
D)its cost per unit and its sales volume.

Question 11

________ inventory systems are designed to maintain a running count of the items in inventory.

A)Partial
B)Physical
C)Perpetual
D)ABC

Question 12

Combining ________ with a POS system gives a small business owner a state-of-the-art checkout system and further extends the abilities of the POS system in the information it provides the owner.

A)TQM
B)an EDI system
C)universal product code labels and scanners
D)an ABC system

Question 13

Perpetual inventory systems:

A)are relatively inexpensive to use and therefore quite popular among discount retailers.
B)are not particularly effective for keeping accurate track of large,expensive items.
C)require consistent use of the inventory sheets in order to provide accurate results.
D)are the simplest and quickest to use of all inventory systems.

Question 14

Which of the following would most likely use a perpetual inventory system?

A)A hardware store
B)A department store
C)A landscaping/greenhouse operation
D)A retailer of large appliances

Question 15

For most retailers and wholesalers,the investment in ________ is the largest capital outlay next to payroll.

A)office equipment,computers,etc.
B)vehicles,automobiles and trucks
C)inventory
D)taxes and licensing fees

Question 16

Which of the following functions will the typical point-of-sale system perform?

A)Computing the annual dollar usage value of every item in the inventory
B)Allowing the owner to check on the inventory level of any item listed in the database
C)Reconciling actual inventory levels with inventory levels reported by the system
D)Calculating the EOQ on any item in inventory

Question 17

Effective management of inventory begins with:

A)developing an accurate sales forecast.
B)setting realistic inventory turnover objectives.
C)determining what level of safety stock to maintain.
D)establishing purchasing procedures.

Question 18

The most common method of controlling inventory in a small business is the ________ system.

A)floor sample
B)two-bin system
C)partial
D)visual

Question 19

A ________ inventory control system is best suited for controlling merchandise classified as "B" items.

A)partial
B)perpetual
C)visual
D)periodic

Question 20

Computerized POS systems make it possible for entrepreneurs to use a basic ________ inventory system.

A)ABC
B)perpetual
C)visual
D)virtual

Question 21

A form of inventory management used in manufacturing that stresses a harmonious relationship with suppliers is:

A)CRM.
B)TQM.
C)Efficient Consumer Response.
D)JIT II.

Question 22

Most employee theft:

A)involves values in excess of $1,000.
B)is expensive merchandise.
C)is small amounts of cash.
D)is the equivalent of nickel and dime items.

Question 23

JIT systems need two significant human elements to be successful: mutual trust and teamwork,and:

A)an individual incentive/rewards program.
B)staff training.
C)a benefits program.
D)empowerment.

Question 24

The two-bin system and the tag system of inventory control are best suited for items classified as ________ in ABC analysis.

A)"A" items
B)perishable items
C)"C" items
D)"B" items

Question 25

Which of the following is a part of the "Just-In-Time" inventory control philosophy?

A)Job tasks should be highly specialized.
B)Machinery must produce a large number of items to justify long set-up times and high costs.
C)The lower the level of inventory a manufacturer maintains,the more efficient is the production system.
D)Long production runs of standard items are ideal.

Question 26

A retail version of Just-In-Time inventory control is called:

A)EDI
B)TQM.
C)Efficient Consumer Response.
D)JIT II.

Question 27

A periodic physical inventory count:

A)is not necessary if the business owner uses a perpetual inventory control system or has a computerized point of sale (POS)terminal.
B)typically involves one employee and is done weekly.
C)allows the owner to evaluate the effectiveness and the accuracy of his/her inventory control system.
D)is not necessary if the business owner uses an ABC inventory system.

Question 28

An alternative to a two-bin system,wherever space or the type of item doesn't fit the system,would be a:

A)tag system.
B)punch card system.
C)physical inventory system.
D)POS system.

Question 29

By their very nature,"C" items give a firm the opportunity to:

A)keep little safety stock.
B)use minimal inventory control procedures.
C)justify the latest POS or product bar coding systems.
D)use basic analytical tools like EOQ and reorder point analysis.

Question 30

Typically,the small business owner's response to slow-moving inventory is to:

A)hold a one-day sale.
B)mark it down to move it out and put the cash generated into fresh inventory.
C)set up bargain tables or place it in a middle-of-the-aisle display.
D)postpone marking it down until it's too late.

Question 31

According to your authors:

A)JIT involves the consolidation of manufacturing processes.
B)almost any change leading to more efficient inventory use can be considered a part of JIT.
C)only large companies with long manufacturing runs can benefit from the implementation of JIT.
D)manufacturing runs need to be large to justify set-up costs in a JIT environment.

Question 32

The most common method of liquidating slow-moving merchandise is:

A)a markdown.
B)the one-day only sale.
C)quantity discounts for volume purchases.
D)an advertising blitz.

Question 33

"C" items,in an ABC analysis:

A)are those items that account for a moderate dollar usage volume.
B)are those that are low-cost and high-volume by nature.
C)do not require detailed record keeping or inventory control.
D)should be tracked with analytical tools and frequent counts.

Question 34

________ is simply the cost per unit of an item multiplied by the annual quantity used.For instance,the owner of a stereo shop may find that she sold 190 pairs of a popular brand of speaker during the previous year.

A)Daily dollar usage volume
B)Quarterly dollar usage volume
C)Annual dollar usage volume
D)None of the above

Question 35

A physical inventory count should be taken at least:

A)once a week.
B)once a year.
C)every six months.
D)daily.

Question 36

The ABC inventory control system causes managers to:

A)not keep a large safety stock on "A" items because it ties up too much cash.
B)keep a large safety stock on "C" items because they generate the greatest revenue.
C)keep a large safety stock on "A" items.
D)keep small levels of safety stock for "C" items because they are of relatively little value.

Question 37

Companies experience a number of benefits from JIT including:

A)better customer acceptance of their products and services.
B)increased job satisfaction among employees.
C)a reduction of inventory and handling costs.
D)longer equipment life and lower maintenance costs.

Question 38

A firm's ________ expresses the number of times per year the business sells all of its inventory.

A)liquidity ratio
B)inventory turnover ratio
C)operating ratio
D)quick ratio

Question 39

JIT II differs from other production improvement methods in that:

A)it requires the close cooperation of companies and their suppliers.
B)it uses teams.
C)it empowers through extensive training of employees.
D)it makes heavy use of computer technology.

Question 40

"Just-In-Time" inventory control techniques are most successful in what type of environment?

A)Repetitive manufacturing operations where inventory levels are significant at the outset
B)Where product requirements are customized for each customer
C)Where a company changes suppliers regularly and those suppliers are independent of the manufacturer
D)Where inventory levels have been reduced to safety stock levels

Question 41

A visual inventory system works best in firms where:

A)daily sales are slow.
B)the variety of merchandise is very limited.
C)the store is small.
D)All of the above

Question 42

Store owners and employees may apprehend and charge a shoplifter:

A)merely on the suspicion that they have stolen something.
B)if the individual puts something in their bag or pocket without paying for it but hasn't left the store.
C)only if the theft amounts to more than $25.
D)only if they see the theft and can prove the merchandise belongs to the store and wasn't paid for.

Question 43

In general,a(n)________ inventory control system works best in firms in which daily sales are relatively consistent.

A)perpetual
B)periodic
C)visual
D)ABC

Question 44

Which inventory control system is designed to maintain a running count of the items in inventory?

A)Visual control system
B)Perpetual inventory system
C)ABC system
D)JIT system

Question 45

One way to reduce employee theft is:

A)hire private investigators to do background checks on prospective employees.
B)install audio surveillance equipment at key locations in the facility.
C)monitor employees at work and on breaks by having supervisors walk by periodically.
D)to have a strict company policy about theft and to prosecute when someone is caught.

Question 46

Today a small growing company can improve their working relationships with both supplies and customers through the application of ________.

A)Electronic Data Processing (EDP)
B)Electronic Data Interchange (EDI)
C)Electronic Fund Processing (EFP)
D)Customer Relationship Management (CRM)

Question 47

The ________ inventory system is designed to maintain a running count of the items in inventory.

A)perpetual
B)ABC
C)visual control
D)JIT

Question 48

________ system enables business owners to track their inventories and to place orders with vendors quickly and with few errors by linking them to their vendors electronically.

A)Electronic Data Processing (EDP)
B)Electronic Fund Processing (EFP)
C)Electronic Data Interchange (EDI)
D)Enterprise Resource Planning (ERP)

Question 49

When it comes to catching and prosecuting shoplifters:

A)there is only a 1 in 100 chance a shoplifter will go before a judge.
B)nearly ½ of all shoplifters are caught and prosecuted.
C)women and juveniles are most frequently caught,nearly 98% of the time.
D)the storeowner or employees must catch the shoplifter in the store to make the charges stick.

Question 50

Nearly half of all shoplifters are:

A)professionals.
B)impulse shoplifters.
C)juveniles.
D)None of these

Question 51

Kleptomaniacs have a compulsive need to steal even though they have little,if any,need for the items they shoplift.Kleptomaniacs account for less than ________ percent of shoplifters.

A)10
B)5
C)7
D)15

Question 52

Employers can reduce employee theft through:

A)careful screening of employees during hiring.
B)only hiring relatives and the friends of current employees.
C)the use of metal detectors and random strip searches of employees.
D)searching employees' lockers and cars during work hours.

Question 53

In a retail environment,the concept of JIT II is more commonly known as ________.

A)Electronic Inventory Process
B)Efficient Consumer Response (ECR)
C)Electronic Consumer Behavior
D)None of the above

Question 54

A number of organizational factors encourage employee theft including:

A)being permitted to manage their own work and time schedules.
B)working with one-of-a-kind items the employee could never afford to buy.
C)having to elaborate of financial and inventory controls in place.
D)a low probability of getting caught.

Question 55

The ultimate goal for every business is to drive the inventory to ________.

A)zero
B)below average
C)average
D)above average

Question 56

The ________ shoplifter is often a regular customer,well-respected individual,etc.

A)juvenile
B)kleptomaniac
C)professional
D)impulse

Question 57

Employee theft can be caused or encouraged by a number of factors including:

A)physical breakdowns of security.
B)improper cash controls.
C)organizational atmosphere.
D)All of these

Question 58

In a retail environment,rather than build inventories of merchandise that might sit for months before selling (or worse,never sell at all),retailers using ________ replenish their inventories constantly on an as-needed basis.

A)Electronic Inventory Process
B)Electronic Consumer Behavior
C)Efficient Consumer Response (ECR)
D)None of the above

Question 59

The most effective business know that what is required is not simply the technology but the ________ with suppliers who are themselves technologically sophisticated enough to interact on a real time basis to deliver what is needed when it is needed.

A)credit terms
B)Electronic Data Interchange
C)critical strategic alliances
D)None of the above

Question 60

Information needed for a perpetual inventory system is an item's:

A)name.
B)stock number.
C)description.
D)All of the above

Question 61

When storage space or the type of item does not suit the two-bin system,the owner can use the ________.

A)sales system
B)inventory system
C)tag system
D)weighted average system

Question 62

The two primary human elements on which successful JIT systems are built are:

A)mutual trust and teamwork & productivity.
B)mutual trust and teamwork and empowerment.
C)lower labor cost and productivity.
D)high profit and lower labor cost.

Question 63

An advantage of JIT is that it::

A)reduces costly inventories.
B)maintains minimum inventory.
C)helps the company's cash flow.
D)All of the above

Question 64

In ABC method of inventory,A refers to:

A)items account for a high dollar usage volume.
B)items account for a moderate dollar usage volume.
C)items account for low dollar usage volume.
D)None of the above

Question 65

The dollar usage volume of an item is how the importance of the item to inventory is measured in an ABC inventory system.

Question 66

Partial inventory systems are designed to maintain a running count of the items in inventory.

Question 67

Which of the following statement is correct?

A)Items in the A classification should be controlled under a perpetual inventory system with as much detail as necessary.
B)Control of B items should rely more on periodic control systems and basic analytical tools such as EOQ and reorder point analysis.
C)C items typically constitute a minor proportion of the small firm's inventory value and,as a result,require the least effort and expense to control.
D)All of the above

Question 68

In ABC method of inventory,C refers to:

A)items account for a moderate dollar usage volume.
B)items account for low dollar usage volume
C)items account for a high dollar usage volume.
D)None of the above

Question 69

ABC inventory systems are designed to maintain a running count of the items in inventory.

Question 70

When conducting a physical inventory,________ involves counting a number of items on a continuous basis.

A)semi cycle counting
B)cycle counting
C)perpetual inventory
D)None of the above

Question 71

The inventory turnover ratio is computed by:

A)dividing the firm's cost of goods sold by its average inventory.
B)dividing average inventory by firm's cost of goods sold.
C)dividing the firm's revenue by its average inventory.
D)dividing all costs by its average inventory.

Question 72

Point of sale (POS)systems do not perform any of the functions of a traditional cash register but they do maintain an up-to-the minute inventory count.

Question 73

The most common method of controlling inventory in a small business is the perpetual system.

Question 74

Computerized point-of-sale systems have given small business owners the ability to use perpetual inventory control systems across a larger portion of their inventories.

Question 75

The 80/20 rule states that 80% of each sales dollar should be spent on purchases,and the remaining 20% should go towards covering costs and making a profit.

Question 76

Because of their relatively inexpensive nature,perpetual inventory systems are used most frequently and successfully in controlling low-dollar,high-volume items.

Question 77

Perpetual inventory systems keep a continuous tally of each item added to or subtracted from the company's stock of merchandise.

Question 78

Point-of-sale systems can be programmed to alert the business owner when key items drop below the reorder point.

Question 79

In ABC method of inventory,B refers to:

A)items account for a moderate dollar usage volume.
B)items account for a high dollar usage volume.
C)items account for low dollar usage volume.
D)None of the above

Question 80

Visual inventory control systems work best with firms that have strong variations in their sales.