Inventory Management Quiz Study Guide Part 1

Part 1 Because firms tend to have about 30 percent of current assets invested in inventory, a reduction in inventories can result in a significant ______. Multiple choice question. increase in ROI decrease in ROI decrease in total sales increase in total sales Which of the following is NOT a normal function of inventory? Multiple choice question. To meet anticipated demand. To provide an investment vehicle. To hedge against price increases. To decouple operations. To take advantage of quantity discounts. inventories Manufacturing firms have used as buffers between successive operations to maintain continuity of production that would otherwise be disrupted by events such as breakdowns of equipment and accidents that cause a portion of the operation to shut down temporarily. Select all that apply Which of the following statements about inventory management is/are true? One of the goals is to achieve good customer service. One of the goals is to keep inventory costs within reasonable bounds. The decision when to order need not be made, it's automated in the system. Inventory managers must decide how much to order. Excess inventory is preferable to too little inventory. True or false: Many of the items that a firm stocks in inventory are generic regardless of the kind of business it engages in. True false question. True False Which of the following is not a way inventory affects performance measures? Multiple choice question. Ratio of inventory to sales Dividends Return on investment Inventory turnover is the ratio of average cost of goods sold to average inventory investment. One of the reasons a firm carries inventory is to ______, that is, to achieve constant output and use inventory to meet overly high requirements during seasonal periods. Multiple choice question. take advantage of quantity discounts decouple operations smooth production requirements ________ inventory systems continuously keep track of changes to the inventory system and a fixed quantity is ordered when the amount on hand reaches a predetermined level. Multiple choice question. Personal Perpetual Periodic One reason firms carry inventory is to ______, that is, to use inventory as a buffer between successive internal operations to avoid disruption in the event of equipment breakdowns or accidents. Multiple choice question. decouple operations hedge against price increases permit operations Which of the following statements about inventory control systems is/are not true? Multiple select question. A two-bin system is a very simple way of tracking and ordering inventory An advantage of periodic systems is the lack of safety stock required. UPCs and point-of-sale systems do not work well together. Perpetual inventory systems are always able to accurately report inventory levels. The overall objective of inventory management is to achieve satisfactory levels of ______ while keeping inventory ______ reasonable. Multiple choice question. discounts; costs costs; discounts customer service; stockout customer service; costs Which of the following statements about inventory costs is/are true? Multiple select question. Shortage costs occur when there is not enough demand. Purchase and ordering costs are the same. Holding costs can include the cost of insurance. Ordering and setup costs are treated the same. A stock or store of goods is _______. Multiple choice question. inventory raw materials work-in-process ____________ cost is incurred by a firm when demand for inventory exceeds supply. Multiple choice question. Shortage Setup Purchase Which of the following statements about inventory turnover is not true? Multiple choice question. The higher the profit margins, the lower turnover can be. Turnover is the ratio of sales to inventory. Generally, the higher the turnover, the better. The ______ approach classifies inventory items according to a measure of importance, such as annual dollar value. MRP A-B-C A-D-V ______ inventory systems take physical inventory counts at fixed intervals and decide how much to reorder of each item. Perpetual Personal Periodic In order to rank inventory items in an A-B-C analysis, we arrange annual dollar values for all items in ______. Multiple choice question. random order ascending order descending order Which of the following statements about inventory control systems is/are true? Orders in two-bin systems may not be placed at the right time. An advantage of periodic systems is the lack of safety stock required. Some businesses are moving towards using RFID tags to track inventory. An advantage of perpetual systems is the need to continuously keep records. Which is the definition of holding cost in the EOQ model? The cost for receiving inventory. The cost when demand exceeds the supply of inventory. The cost to carry all inventory for a length of time. The cost to carry a single unit in inventory for a length of time. What are the key questions for management concerning cycle counting? (Select all that apply.) Where should the inventory be stored? Who should count it? What inventory should be counted? When should cycle counting be performed? How much accuracy is needed? Which statement about holding costs, also known as carrying costs, are correct? (Select all that apply.) Multiple select question. Carrying costs are assumed to be zero. Carrying costs can be stated as a percentage of item price, Carrying costs can be negative. Carrying costs can be stated as a constant. Which of the following is/are the basic issue/s of inventory management? Multiple select question. Which carrier to use to deliver the order How much to order When to order From which supplier to order Which of the following statements about the A-B-C approach is/are true? Its purpose is to identify inventory items that are the most important to the business. C items are the most closely managed, while A items are least important. Approximately 10% to 20% of items account for about 60% to 70% of annual dollar value. It is intended to help firms allocate control efforts based on the relative importance of items in inventory. Which of the following are assumptions of the EOQ model? Lead time is known. Annual demand is known. It works for multiple products at once. Quantity discounts are available. Lead time can be variable. Which is the correct formula for the total annual cost in the EOQ model? (Q/2)H + (D/Q)S Q/D (Q/2)H + √2DSH2DSH (D/Q)H (D/Q)S √2DSH2DSH D/Q __ is a physical count of items in inventory used to reduce the discrepancies between inventory records and the actual items on hand. Perpetual counting Bar code scanning Cycle counting How much to order, and when to order, are the two basic issues in an _______. cycle counting model A-B-C- analysis inventory ordering policy Which statement is true for the economic production quantity (EPQ) model? It is used when production occurs in batches. Like EOQ, all orders are received in a single delivery. It is used only in jobs shops. Which of the following statements about the EOQ model is/are true? Orders are placed when there is just enough inventory left to cover the lead time demand. As Q decreases, the annual holding cost increases. The EOQ minimizes the sum of annual ordering and holding costs. As Q decreases, the annual ordering cost decreases. Which is the correct formula for the annual ordering cost in the EOQ model? (Q/2)H (D/Q)S √2DSH2DSH (D/Q)H (Q/2)H + (D/Q)S Q/D D/Q