Deck 18: Inventory Management

Question 1

10)On an annual basis,total setup costs ______.

A)decrease as the quantity produced per production run increases
B)increase as the quantity produced per production run increases
C)increase as the number of production runs decreases
D)increase as the number of setups required decreases

Answer 1

A

Question 2

4)Which of the following is NOT a type of inventory-related costs?

A)purchasing costs
B)ordering costs
C)setup costs
D)cost of holding the wrong products

Answer 2

D

Question 3

5)Major categories of inventory-related costs include ______.

A)cost of defective raw materials
B)holding or carrying costs
C)cost of government audits
D)cost of holding the wrong products

Answer 3

B

Question 4

12)Insurance to cover costs associated with obsolete,stolen,deteriorated,or spoiled inventory falls under ______.

A)ordering costs
B)setup costs
C)stock-out costs
D)holding costs

Question 5

3)Inventories ______.

A)have economic value
B)are listed as current liabilities in a company's balance sheet
C)are subject to government inspection
D)depend on the number of employees in the company

Question 6

9)Setup costs are ______.

A)variable costs
B)fixed costs
C)sunk costs
D)annual costs

Question 7

11)Insurance to protect inventory is a type of ______.

A)ordering costs
B)setup costs
C)stock-out costs
D)holding costs

Question 8

20)Stock held to meet a firm's expected or normal demand is ______.

A)cycle stock
B)required stock
C)surplus stock
D)seasonal stock

Question 9

7)Ordering costs ______.

A)are expressed on a per-order basis
B)are proportional to quantity ordered
C)depend on quality of products ordered
D)are usually higher than holding costs

Question 10

6)Ordering costs include ______.

A)warranty costs
B)the cost of inspecting goods received for quality and quantity
C)costs of scrap
D)costs of rework

Question 11

16)Shortage costs refer to ______.

A)ordering costs
B)setup costs
C)stock-out costs
D)purchasing costs

Question 12

17)Which of the following is NOT an example of holding costs?

A)storage
B)risk
C)purchase
D)interest

Question 13

8)Setup costs ______.

A)are the costs of setting up retail operations
B)are the costs of changing production from one item to another
C)are usually higher than holding costs
D)are the same as storage costs

Question 14

15)Holding costs have an inverse relationship with ______.

A)ordering costs
B)dismantling costs
C)costs of logistics
D)costs of warehousing

Question 15

19)Tangible stock-out costs include ______.

A)permanent loss of customers and future sales
B)failure to meet ISO requirements
C)potential for government audits
D)lost revenues

Question 16

18)Which of the following is NOT a characteristic of stock-out costs?

A)They are inversely related to carrying costs.
B)They can be tangible costs.
C)They can be intangible costs.
D)They are directly related to setup costs.

Question 17

1)Inventory affects ______.

A)customer satisfaction
B)corporate strategies
C)compliance with government regulations
D)adherence to ISO specifications

Question 18

2)Which of the following is one of the types of inventory carried by a company?

A)different foods for employee consumption
B)maintenance,repair,and operations (MRO)inventory
C)arms and ammunition for security purposes
D)pet food for animals on company premises

Question 19

13)Holding costs can be expressed as ______.

A)the total carrying cost per unit per time period
B)the sum of setup costs and ordering costs
C)a hidden cost
D)proportional to manufacturing costs

Question 20

14)As a percentage of the value of an item,annual holding costs can be as high as ______.

A)20%
B)30%
C)40%
D)50%

Question 21

34)Which of the following is true with regard to backorders?

A)The sale is lost for the moment but filled at a future date.
B)The revenue earnings are improved.
C)They have a positive impact on the company's reputation.
D)They have a positive impact on the company's market share.

Question 22

22)Which of the following is NOT a reason why companies hold inventory?

A)to respond to the uncertainties in demand levels
B)to respond to the uncertainties in supply levels
C)to safeguard against shipping delays
D)to increase shortages artificially

Question 23

30)Which of the following is usually NOT a reason to hold inventory?

A)to drive up price
B)to smooth out fluctuations in production
C)to hedge against variations in demand and supply
D)to decouple one step in the production process from another

Question 24

32)Which of the following is NOT an appropriate measure of good inventory management?

A)order fulfillment lead time
B)item fill rate
C)inventory accuracy
D)amount of seasonal inventory

Question 25

21)Which of the following statements is true with regard to cycle stock?

A)It is also called surplus stock.
B)It is received from a downstream supply chain partner.
C)It is seasonal in nature.
D)It is also referred to as base stock.

Question 26

24)Materials purchased in anticipating of rising prices,shortages,government instability,and the like is referred to as ______.

A)hedge inventory
B)anticipation inventory
C)seasonal inventory
D)stabilizing inventory

Question 27

38)Which of the following is true with regard to inventory turnover ratio?

A)Generally,the higher a firm's inventory turnover ratio,the less time its inventory spends in storage and,therefore,the more efficient is the firm's use of the inventory.
B)Generally,the lower a firm's inventory turnover ratio,the less time its inventory spends in storage and,therefore,the less efficient is the firm's use of the inventory.
C)Generally,the higher a firm's inventory turnover ratio,the less time its inventory spends in storage and,therefore,the less efficient is the firm's use of the inventory.
D)Generally,the lower a firm's inventory turnover ratio,the less time its inventory spends in storage and,therefore,the more efficient is the firm's use of the inventory.

Question 28

37)Which of the following is NOT a problem that inventory turnover can alert managers to?

A)overstocking
B)product obsolescence
C)impending stock-out situations
D)increasing production costs

Question 29

23)Purchasing materials in higher volumes has the advantage of reducing ______.

A)unit cost of material
B)costs associated with storing these materials
C)avoiding the possibility of having a surplus of finished products
D)price charged to customer

Question 30

28)Which of the following is NOT associated with faster modes of transportation?

A)reduced in-transit inventory costs
B)reduced in-transit storage costs
C)higher transportation costs
D)lower customer satisfaction

Question 31

26)Advantages of full truckload shipments are ______.

A)power transportation cost per unit
B)potential for quality in transportation
C)reduced customer satisfaction
D)potential for reduced setup costs

Question 32

27)Inventories that are in transit in containers or trucks ______.

A)are known as pipeline inventories
B)are known as in-house inventories
C)are relatively small in global supply chain (as compared to domestic supply chains)
D)are known as en route inventories

Question 33

25)Anticipation inventory is ______.

A)inventory held in excess of a firm's cycle stock
B)to avoid expected fall in demand
C)also called seasonal inventory
D)stock-out avoidance inventory

Question 34

31)Which of the following is NOT a measure of good inventory management?

A)cost of goods sold
B)backorders and lost sales
C)inventory turnover
D)days of inventory in stock

Question 35

29)An inventory held to reduce or eliminate fluctuations in production is called a(n)______.

A)smoothing inventory
B)hedge inventory
C)anticipation inventory
D)pipeline inventory

Question 36

36)Inventory turnover measured annually is ______.

A)the ratio of (Annual Average Inventory Investment)to (Annual Cost of Goods Sold)
B)the ratio of (Annual Cost of Goods Sold)to (Annual Average Inventory Investment)
C)the product of (Annual Average Inventory Investment)and (Annual Cost of Goods Sold)
D)the product of (Annual Cost of Goods Sold)and (Annual Average Inventory Investment)

Question 37

40)Order-fulfillment lead time is ______.

A)the average time it takes from the submission of a customer's purchase order until the company delivers the order
B)the average time it takes from the time the customer's order is shipped till the customer receives the order
C)the average time it takes from the time production of a customer's order starts till the production is completed
D)the average time it takes for a customer's order to be packaged for shipping

Question 38

39)A high inventory turnover ratio indicates that ______.

A)the firm is converting its inventory to profits faster
B)potential for product obsolescence is high
C)inventory is not being replenished
D)potential for product theft and damage is high

Question 39

33)A backorder is ______.

A)a customer order a company was unable to meet because the item demanded was not in stock
B)a customer order a company is unable to fulfill because the product is not exactly as per customer specifications
C)a customer order a company is unable to fulfill because the customer has not been able to finance the purchase
D)a customer order a company is unable to fulfill because the product does not meet manufacturing tolerances

Question 40

35)Inventory turnover is ______.

A)a measure of how frequently a business sells its inventory in a given time period
B)calculated as the ratio of the cost of goods sold to the average manufacturing cost
C)calculated as the ratio of the cost of goods returned by customers to cost of goods sold to customers
D)calculated as the product of the cost of goods returned by customers to cost of goods sold to customers

Question 41

48)The ABC classification method classifies inventory based on ______.

A)unit value
B)amount of safety stock needed
C)product quality
D)quantity demanded

Question 42

56)Periodic review systems are ______.

A)characterized by weekly,monthly,or annual physical counts of inventory
B)best suited for businesses that sell high-volume products
C)systems where inventory is replenished halfway during a consumption cycle
D)systems where the entire inventory of a product is ordered by a single customer

Question 43

52)In a single-period system,______.

A)the entire inventory of a product is ordered at one time
B)as inventory is consumed it is continuously replenished
C)inventory is replenished halfway during a consumption cycle
D)the entire inventory of a product is ordered by a single customer

Question 44

44)Which of the following is NOT associated with cycle counting?

A)counting a random sample or subset of inventory in stock
B)counting inventory in a particular location
C)counting inventory on a particular day
D)counting units left in inventory after the sale of each unit

Question 45

54)A single-period system ______.

A)is appropriate for ordering roses for Valentine's Day
B)provides many opportunities to place the order
C)is one where inventory is replenished halfway during a consumption cycle
D)is one where the entire inventory of a product is ordered by a single customer

Question 46

46)The main objectives of inventory management are to provide customers with the right number of products and ______.

A)to provide these at the right place and at the right time
B)to keep inventory at a maximum
C)to ensure cost of production is low
D)to avoid stock-outs

Question 47

50)When we apply the ABC classification to cycle counting,we would ______.

A)cycle count A items more frequently than B items
B)cycle count C items more frequently than A items
C)cycle count C items more frequently than B items
D)cycle count C items as frequently as A items

Question 48

57)Periodic review systems are ______.

A)characterized by a continuous physical count of inventory
B)best suited for businesses that sell low-volume products
C)also known as seasonal review systems
D)used extensively in the service industry

Question 49

55)A periodic review system ______.

A)is also known as a periodic inventory system
B)is also known as a variable order interval system
C)is one where the entire inventory is ordered once and not replenished
D)is suitable for selling high-volume products

Question 50

60)A continuous review system ______.

A)requires stringent monitoring of inventories because they have high value
B)is best suited for the C category of items under the ABC classification scheme
C)is also known as the annual inventory system
D)is one where inventory replenishment is done annually

Question 51

59)A continuous review system is also known as a(n)______.

A)fixed order quantity system
B)annual inventory system
C)periodic review system
D)fixed order interval system

Question 52

43)We can track inventory accuracy by ______.

A)calculating the mean absolute deviation between the quantity shown in inventory records and the real quantity that is physically available
B)calculating the difference between production records and sales records
C)counting each unit after each manufacturing cycle
D)counting units left in inventory after the sale of each unit

Question 53

42)Which of the following is true with regard to fill rates and inventory?

A)There is a strong relationship between fill rates and the amount of inventory in stock.
B)As inventory is added in steady increments,a firm's fill rate decreases.
C)The higher the fill rate,the easier it is to improve the fill rate.
D)Fill rates are inversely related to inventory levels.

Question 54

45)Which of the following is NOT a benefit of cycle counting?

A)fewer disruptions to daily operations than a complete physical count
B)providing an ongoing measure of inventory accuracy
C)focusing on items critical to business processes
D)less time consuming than using RFID

Question 55

41)The fill rate ______.

A)is the percentage of customer orders that can be satisfied from inventory in stock
B)is inversely related to effectiveness of inventory management
B)is the product of the stock-out rate and rate at which customers place orders
D)is lower during periods of seasonal demand

Question 56

47)To achieve the goals of inventory management,operations managers should ask this: ______.

A)How much inventory should we order or produce?
B)What products should we offer?
C)At what price should we offer a product?
D)What level of quality should we offer?

Question 57

53)When products are seasonal or have a limited shelf life,a company is more likely to use a ______.

A)single-period system
B)multi-period system
C)continuous replenishment system
D)periodic review system

Question 58

58)In a periodic inventory system,______.

A)inventory is monitored frequently between orders
B)costs associated with purchasing and ordering can be minimized
C)savings due to economies of scale are not available
D)physical counting and ordering of replacement items occur at different times

Question 59

49)In an ABC classification system,an A item ______.

A)may have low value but high sales volume
B)may have low demand but high ordering cost
C)may have low quality but high holding cost
D)may have low quality but high ordering cost

Question 60

51)Which of the following is NOT one of the three basic types of inventory control systems?

A)single-period system
B)multi-period system
C)continuous review system
D)periodic review system

Question 61

61)The use of radio frequency identification (RFID)______.

A)has increased the accuracy and efficiency of managing inventory
B)is most appropriate for companies that handle inventory in small quantities
C)is not as efficient as the periodic review system
D)is a response to the costs of cycle counting

Question 62

70)Customer responses to rationing ______.

A)can eliminate the bullwhip effect
B)is also referred to as gaming
C)depends on price of the product
D)depends on frequency with which inventory is replenished

Question 63

75)Which of the following is NOT true about channel alignment?

A)It refers to cooperation among supply chain members.
B)It is a way to worsen the bullwhip effect.
C)It facilitates coordination of inventory planning.
D)It facilitates coordination of warehousing.

Question 64

65)A major underlying cause for the bullwhip effect includes ______.

A)revised demand forecasts
B)the pull system of manufacture
C)low elasticity of demand
D)low elasticity of supply

Question 65

76)VMI is ______.

A)a channel alignment method that mitigates the bullwhip effect caused by forecast updates
B)vertically merged integration
C)when the vendor merges his inventory with the inventory of the company
D)a way to reduce cost of inventory transportation

Question 66

79)Just-in-time replenishment practices include ______.

A)continuous replenishment programs (CRP)
B)discrete replenishment programs (DRP)
C)annual replenishment system (ARS)
D)a push system of replenishment

Question 67

71)Strategies for mitigating the bullwhip effect include ______.

A)channel alignment
B)restricting information flows
C)reducing inventory
D)increasing price

Question 68

62)A type of RFID system used for inventory tracking is the ______ system.

A)active
B)precise
C)positive
D)responsive

Question 69

74)A postponement strategy ______.

A)refers to delaying the final assembly of the product until more accurate demand information becomes available
B)is a way to delay consumption
C)is an attempt to avoid seasonal fluctuations in demand
D)is an attempt to avoid seasonal fluctuations in supply

Question 70

68)Batch ordering ______.

A)can reduce a firm's ordering costs
B)can reduce demand for products and materials
C)can reduce elasticity of demand for that product
D)can reduce elasticity of supply for that product

Question 71

66)The bullwhip effect ______.

A)results from information distortion
B)is due to low elasticity of demand
C)is due to low elasticity of supply
D)results from too much information

Question 72

69)Which of the following does NOT contribute to the bullwhip effect?

A)price discounts
B)coupons
C)quantity discounts
D)elasticity of demand

Question 73

64)The bullwhip effect suggests that ______.
A)changes in consumer demand are magnified as one moves upstream in the supply chain

A)changes in consumer demand are minimized as one moves upstream in the supply chain
B)changes in consumer demand are constant as one moves downstream in the supply chain
B)changes in consumer demand are magnified as one moves downstream in the supply chain

Question 74

73)If supply chain members share inventory information,they can ______.

A)coordinate their individual operations
B)update their forecasts independent of other supply chain members
C)fix prices to improve profit margins
D)influence demand elasticity

Question 75

78)A single-echelon inventory system ______.

A)is one where each supply chain partner (echelon)sequentially forecasts demand
B)reduces potential for the bullwhip effect
C)is one where supply chain partners forecast demand as a single group
D)reduce information flows

Question 76

63)Active tags are ______.

A)useful for tracking high-value goods that need to be scanned over long ranges
B)less expensive than passive tags
C)those that can be monitored from a long distance (e.g.,company headquarters)
D)those for which government subsidies are available

Question 77

77)Disintermediation ______.

A)is used to prevent information distortion in a supply chain
B)refers to a downstream supply chain member selling directly to an upstream supply chain member
C)is one method to avoid or reduce seasonality of demand
D)is when a supplier of raw materials sells products directly to the end consumer

Question 78

67)The bullwhip effect ______.

A)is enhanced if the lead time is longer
B)is minimized if the lead time is longer
C)is enhanced if the lead time is shorter
D)is enhanced if the lead time is fluctuating

Question 79

72)Strategies for mitigating the bullwhip effect include ______.

A)operational efficiency
B)price fixing
C)reducing inventory
D)increasing price

Question 80

80)Which of the following is least consistent with sustainability practices in inventory management?

A)minimizing wasted movement
B)less excess inventory
C)reduced waiting time
D)push system