Question 1

Dependent demand must be forecasted to be accurate.

Accepted Answer

Dependent demand is derived from the demand for another item and is calculated based on the production schedule of the parent item, not forecasted.

Question 2

The four categories of inventory are raw materials, intermediate assemblies, work-in-progress and finished goods.

Accepted Answer

The four categories of inventory are raw materials, work-in-progress, finished goods, and maintenance, repair, and operations (MRO) supplies. Intermediate assemblies are not typically classified as a separate category.

Question 3

Radio Frequency Identification (RFID) is beginning to replace bar code inventory tracking, however a weakness is that it requires a direct line of sight for RFID tags to be read.

Accepted Answer

RFID technology does not require a direct line of sight for tags to be read, as the signals can pass through certain materials and be read from a distance.

Question 4

MRO supplies are a type of work-in-progress.

Accepted Answer

MRO (Maintenance, Repair, and Operations) supplies are not work-in-progress; they are materials and tools used to maintain and repair equipment, not part of the production process itself.

Question 5

The ABC inventory matrix combines two ABC analyses-one is based on current inventory valuation and the other is based on annual inventory dollar usage..

Accepted Answer

The ABC inventory matrix does indeed combine two ABC analyses - one based on current inventory valuation and the other based on annual inventory dollar usage.

Question 6

The (s, S) continuous review policy is to order the same quantity, Q, when physical inventory reaches the reorder point.

Accepted Answer

The (s, S) policy involves ordering enough to raise the inventory level to S when it falls to or below s, not ordering a fixed quantity Q.

Question 7

Steering wheels purchased by Ford are an example of dependent demand.

Accepted Answer

Dependent demand refers to the demand for a component part or raw material that is necessary for the production of another item, such as a steering wheel for a car. Therefore, the demand for steering wheels is dependent on the demand for cars, which makes it an example of dependent demand.

Question 8

MRO supplies are a type of indirect costs.

Accepted Answer

MRO supplies (Maintenance, Repair, and Operating supplies) are expenses for materials, equipment, and consumables used to maintain, repair, or operate a facility or machinery. It is a type of indirect cost as it is not directly associated with the production of goods or services.

Question 9

Pareto Analysis means that 20 percent of the items get about 80 percent of the safety stock.

Accepted Answer

Pareto Analysis, also known as the 80/20 rule, suggests that 20 percent of causes are responsible for 80 percent of the effects, but it does not specifically relate to safety stock distribution.

Question 10

One of the assumptions of the economic order quantity model (EOQ) is that purchase price must remain constant.

Accepted Answer

One of the assumptions of the EOQ model is that purchase price remains constant. This means that the per-unit cost of the item being ordered does not change during the ordering process. If purchase price fluctuates, an extension of the EOQ model, known as the discount model, can be used to incorporate quantity discounts into the model.

Question 11

In the economic manufacturing quantity model (EMQ), the annual consumption rate must be less than the annual production rate.

Accepted Answer

The EMQ model assumes that the annual consumption rate is less than or equal to the annual production rate, as it is not economically feasible for a company to produce more than it can sell or consume. This assumption allows for the efficient production of goods while minimizing costs.

Question 12

The statistical reorder point is calculated as the average demand during the delivery lead time plus the desired safety stock.

Accepted Answer

This statement is true. The statistical reorder point is calculated by adding the average demand during the delivery lead time (also known as lead time demand) and the desired safety stock. This calculation determines the level of inventory that triggers a replenishment order to be placed in order to maintain sufficient stock levels.

Question 13

The economic order quantity model (EOQ) is the optimal independent demand order quantity that minimizes total annual inventory costs.

Accepted Answer

EOQ model is designed to determine the optimal order quantity that minimizes the total annual inventory costs. It considers the ordering costs and holding costs to find out the most economical order size for a specific product. Hence, the given statement is True.

Question 14

When demand and lead time are constant, the reorder point (ROP) is less than the demand during lead time.

Accepted Answer

When demand and lead time are constant, the reorder point (ROP) is equal to the demand during lead time, not less.

Question 15

The EOQ equation is derived by setting the annual purchase cost equal to the annual holding cost.

Accepted Answer

The EOQ (Economic Order Quantity) equation is derived by setting the annual ordering cost equal to the annual holding cost, not the purchase cost.

Question 16

The optimal order quantity for the quantity discount model is always at one of the price breakpoints.

Accepted Answer

The answer of The optimal order quantity for the quantity...

Question 17

When both the demand and lead time of a product are variable, firms must keep a higher safety stock level compared to variations in just demand, to offer the same service level.

Accepted Answer

When both demand and lead time are variable, there is more uncertainty in the supply chain, making it difficult for firms to accurately forecast demand and plan inventory levels. As a result, firms typically keep a higher safety stock level to ensure that they can meet customer demand and maintain a desired service level.

Question 18

The inventory turnover ratio shows how efficiently a firm is using its inventory to generate revenue.

Accepted Answer

The inventory turnover ratio is a measure of how quickly a company sells its inventory and replaces it with new inventory. A higher inventory turnover ratio indicates that a company is selling its inventory quickly and efficiently, which can lead to higher profitability. Thus, the statement "The inventory turnover ratio shows how efficiently a firm is using its inventory to generate revenue" is true.

Question 19

Cycle counting means to physically count inventory on a periodic basis.

Accepted Answer

Cycle counting is a method of inventory management where a small subset of inventory is counted on a periodic basis to ensure accurate stock levels. It is a physical inventory count of a small portion of inventory that is integrated into a company's inventory control system.

Question 20

The ABC inventory control prioritizes dependent demand inventory items into three groups, A, B, and C.A items receive the smallest amount of safety stock, while C items typically have the most safety stock.

Accepted Answer

ABC inventory control prioritizes independent demand inventory items, not dependent ones. A items, being the most valuable, typically have more safety stock to prevent stockouts, while C items have the least.

Quiz 7: Inventory Management