inventory management quiz questions

Inventory Managment

Though one objective of inventory management is to minimize the cost of holding inventory, name anadditional goal. HINT: It is the reason we have safety stockCustomer service level.

1.

To provide satisfactory levels of customer service while keeping inventory costs within reasonable bounds,what two fundamental decisions must be made about inventory?Timing and size of orders.

2.

An example of inventory holding cost is the cost of moving goods to temporary storage after receipt froma supplier.True FalseFALSEThese are ordering costs.

3.

Interest, insurance, and opportunity costs are all associated with holding costs.True FalseTRUEThese are holding costs.

4.

The A-B-C approach involves classifying inventory items by unit cost, with expensive items classified asA' items and low cost items classified as C' items.True FalseFALSEA-B-C approach classifies inventory according to some measure of importance.

5.

EOQ inventory models are basically concerned with the timing of orders.True FalseFALSEEOQ models are concerned with the size of orders.

6.

Carrying cost is a function of order size; the larger the order, the higher the inventory carrying cost.True FalseTRUELarger order quantities lead to higher inventory carrying cost

7.

ROP models indicate to managers the time between orders.True FalseFALSEROP models indicate when, with regard to on-hand inventory, orders should be placed.

8.

When to order can be calculated by the ROP and expressed as a quantity.TRUEROP models indicate when, with regard to on-hand inventory, orders should be placed.

9.

The rate of demand is an important factor in determining the ROP.True FalseTRUEThe demand rate multiplied by the lead time is a major part of the ROP.

10.

Safety stock is held because we anticipate future demand.True FalseFALSESafety stock is held because we anticipate fluctuations in future demand or in lead time

11.

Variability in demand and/or lead time can be compensated for by safety stock.True FalseTRUESafety stock can be used to accommodate these.

12.

ROP models assume that demand during lead time is composed of a series of dependent daily demands.True FalseFALSEROP models assume that demand during lead time is composed of a series of independent daily demands.

13.

Profit margins tend to be inversely related to inventory turns.True FalseTRUEThis is typically the case.

14.

In the fixed-order interval model, the order size is the same for each order.True FalseFALSEOrder size varies from order to order in a fixed-order interval model.

15.

The fixed-order interval model requires a continuous monitoring of inventory levels.True FalseFALSEThe fixed-order interval model leads to periodic monitoring of inventory levels.

16.

The single-period model can be very helpful in determining how much to order.True False

17.

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TRUEThe single-period model helps determine how many to order.Monitoring inventory turns over time can be used as a measure of performance.True FalseTRUEGreater turnover often implies better performance.

18.

The basic EOQ model ignores the purchasing cost.True FalseTRUEOnly if quantity discounts are offered does purchasing cost enter into EOQ analysis.

19.

In a single period inventory model, if demand exceeds stocking level, a __________ occursStockout

20.

Does safety stock eliminate stock outs?No. It only decreases the likelihood

21.

The calculation of safety stock requires knowledge of __________ and __________.Service level and lead time variability

22.

What are the two basic issues in inventory management?1. What to order2. How much to order

23.

All stock outs must be avoided.True FalseFALSEMost of the time it would be too costly to avoid all stockouts.

24.

Which of the following is not one of the assumptions of the basic EOQ model?A. Annual demand requirements are known and constant.B. Lead time does not vary.C. Each order is received in a single delivery.D. Quantity discounts are available.E. All of the above are necessary assumptions.D. Quantity discounts are available

25.

Which of the following interactions with vendors would potentially lead to inventory reductions?A. reduce lead timesB. increase safety stockC. less frequent purchasesD. larger batch quantitiesE. longer order intervalsA. Reducing lead times

26.

Dairy items, fresh fruit and newspapers are items that:A. do not require safety stocksB. cannot be ordered in large quantitiesC. are subject to deterioration and spoilageD. require that prices be lowered every two daysE. have minimal holding costsC. subject to deterioration and spoilage

27.

Which of the following is least likely to be included in order costs?A. processing vendor invoices for paymentB. moving delivered goods to temporary storageC. inspecting incoming goods for quantityD. taking an inventory to determine how much is neededE. temporary storage of delivered goodsE. temporary storage of delivered goods

28.

In an A-B-C system, the typical percentage of the number of items in inventory for A items is about:A. 10B. 30C. 50D. 70E. 90A. 10

29.

In the A-B-C classification system, items which account for fifteen percent of the total dollar-volume for amajority of the inventory items would be classified as:A. A itemsB. B itemsC. C itemsD. A items plus B itemsE. B items plus C itemsC. C items

30.

In the A-B-C classification system, items which account for sixty percent of the total dollar-volume for few31.


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inventory items would be classified as:A. A itemsB. B itemsC. C itemsD. A items plus B itemsE. B items plus C itemsA. A itemsThe EOQ model is most relevant for which one of the following?A. ordering items with dependent demandB. determination of safety stockC. ordering perishable itemsD. determining fixed interval order quantitiesE. determining fixed order quantitiesE. determining fixed order quantities

32.

In a supermarket, a vendor's restocking the shelves every Monday morning is an example of:A. safety stock replenishmentB. economic order quantitiesC. reorder pointsD. fixed order intervalE. blanket orderingD. fixed order interval

33.

In the basic EOQ model, if lead time increases from five to 10 days, the EOQ will:A. doubleB. increase, but not doubleC. decrease by a factor of twoD. remain the sameE. none of the aboveD. Remain the same because EOQ is about how much to order, not when to order

34.

Which one of the following is not generally a determinant of the reorder point?A. rate of demandB. length of lead timeC. lead time variabilityD. stockout riskE. purchase costE. purchase cost

35.

If no variations in demand or lead time exist, the ROP will equal:A. the EOQB. expected usage during lead timeC. safety stockD. the service levelE. the EOQ plus safety stockB. expected usage during lead timeThis is because R= dL

36.

Which one of the following is implied by a "lead time" service level of 95 percent?A. Approximately 95 percent of demand during lead time will be satisfied.B. Approximately 95 percent of inventory will be used during lead time.C. The probability is 95 percent that demand during lead time will exactly equal the amount on hand atthe beginning of lead time.D. The probability is 95 percent that demand during lead time will not exceed the amount on hand at thebeginning of lead time.E. none of the aboveD. The probability is 95 percent that demand during lead time will not exceed the amount on hand at thebeginning of lead time.

37.

All of the following are possible reasons for using the fixed order interval model except:A. Supplier policy encourages use.B. Grouping orders can save in shipping costs.C. The required safety stock is lower than with an EOQ/ROP model.D. It is suited to periodic checks of inventory levels rather than continuous monitoring.E. Continuous monitoring is not practical.C. The required safety stock is lower than with an EOQ/ROP model

38.

Which of these products would be most apt to involve the use of a single-period model?A. gold coinsB. hammersC. fresh fishD. calculatorsE. frozen cornC. fresh fish

39.

The management of supply chain inventories focuses on:A. internal inventories

40.


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B. external inventoriesC. both internal and external inventoriesD. safety stock eliminationE. optimizing reorder pointsC. both internal and external inventoriesAn operations strategy for inventory management should work towards:A. increasing lot sizesB. decreasing lot sizesC. increasing safety stocksD. decreasing service levelsE. increasing order quantitiesB. decreasing lot sizes

41.

An operations strategy which recognizes high carrying costs and reduces ordering costs will result in:A. unchanged order quantitiesB. slightly decreased order quantitiesC. greatly decreased order quantitiesD. slightly increased order quantitiesE. greatly increased order quantitiesC. greatly decreased order quantities

42.

The need for safety stocks can be reduced by an operations strategy which:A. increases lead timeB. increases lead time variabilityC. increases lot sizesD. decreases ordering costsE. decreases lead time variabilityE. decreases lead time variability

43.

With an A-B-C system, an item that had a high demand but a low annual dollar volume would probablybe classified as:A. AB. BC. CD. none of theseC. C items

44.

The fixed order interval model would be most likely to be used for this situation:A. A company has switched from mass production to lean production.B. Production is done in batches.C. Spare parts are ordered when a new machine is purchased.D. Grouping orders can save shipping costs.E. none of theseD. Grouping orders can save shipping costs.

45.

Which one of these would not be a factor in determining the reorder point?A. the EOQB. the lead timeC. the variability of demandD. the demand or usage rateE. all are factorsA. the EOQ

46.


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inventory management quiz questions

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