Question 1

Which of the following would NOT be included in calculating inventory carrying costs?

Accepted Answer

A)  capital costs 
B)  ordering costs 
C)  obsolescence costs 
D)  all the above 
E)  none of the above 
A)  capital costs 
B)  ordering costs 
C)  obsolescence costs 
D)  all the above 
E)  none of the above B

Question 2

Delivery of goods from a supplier is in transit for 14 days. If the annual demand is 2600 units, what is the average annual inventory in transit?

Accepted Answer

A)  89.7 units 
B)  100 units 
C)  1.97 units 
D)  cannot be determined from the data given 
A)  89.7 units 
B)  100 units 
C)  1.97 units 
D)  cannot be determined from the data given A

Question 3

Which of the following statements is best about inventory management?

Accepted Answer

A)  inventories and production can be managed separately 
B)  inventory is not important at the production planning level 
C)  inventories are usually insignificant on the balance sheet 
D)  all the above are true 
E)  none of the above is true 
A)  inventories and production can be managed separately 
B)  inventory is not important at the production planning level 
C)  inventories are usually insignificant on the balance sheet 
D)  all the above are true 
E)  none of the above is true E

Question 4

Which of the following are reasons for keeping inventory?
I. To allow for goods in transit.
II. To build up stock for seasonal demand.
III. To reduce production costs.
IV. To guard against uncertainty in supply and demand.

Accepted Answer

A)  I, II and III only 
B)  II, III and IV only 
C)  II and IV only 
D)  all the above are valid reasons 
A)  I, II and III only 
B)  II, III and IV only 
C)  II and IV only 
D)  all the above are valid reasons

Question 5

Which of the following statements is NOT true?

Accepted Answer

A)  the annual cost of ordering depends on the number of orders per year 
B)  the annual cost of ordering can be reduced by ordering less at any one time 
C)  the annual cost of carrying inventory can be decreased by ordering less at one time 
D)  all the above are true 
E)  none of the above is true 
A)  the annual cost of ordering depends on the number of orders per year 
B)  the annual cost of ordering can be reduced by ordering less at any one time 
C)  the annual cost of carrying inventory can be decreased by ordering less at one time 
D)  all the above are true 
E)  none of the above is true

Question 6

A company carries an average annual inventory of $1,000,000. If the cost of capital is 10%, storage costs are 8%, and risk costs are 7%, what does it cost per year to carry this inventory?

Accepted Answer

A)  $100,000 
B)  $80,000 
C)  $70,000 
D)  $250,000 
E)  cannot be determined from the data given 
A)  $100,000 
B)  $80,000 
C)  $70,000 
D)  $250,000 
E)  cannot be determined from the data given

Question 7

Items that are purchased or manufactured in quantities greater than needed immediately create
Inventories:

Accepted Answer

A)  anticipation 
B)  lot size 
C)  hedge 
D)  any of the above 
E)  none of the above 
A)  anticipation 
B)  lot size 
C)  hedge 
D)  any of the above 
E)  none of the above

Question 8

If there are 20 working days in a month, the monthly usage is 660 units, and there are 100 units on
Hand, approximately how many days' supply are there?

Accepted Answer

A)  3 
B)  5 
C)  7 
D)  33 
A)  3 
B)  5 
C)  7 
D)  33

Question 9

Which of the following costs would NOT be included in the cost of placing an order?

Accepted Answer

A)  setup costs 
B)  costs of placing a purchase order 
C)  back-order costs 
D)  all the above 
E)  none of the above 
A)  setup costs 
B)  costs of placing a purchase order 
C)  back-order costs 
D)  all the above 
E)  none of the above

Question 10

Which of the following statements is best?

Accepted Answer

A)  two items with the same part number but in two different inventories would be one stock keeping unit (SKU) 
B)  two white shirts of different sizes in the same inventory would be one SKU 
C)  two items with the same part number in the same inventory would be one SKU 
D)  all the above are true 
E)  none of the above is true 
A)  two items with the same part number but in two different inventories would be one stock keeping unit (SKU) 
B)  two white shirts of different sizes in the same inventory would be one SKU 
C)  two items with the same part number in the same inventory would be one SKU 
D)  all the above are true 
E)  none of the above is true

Question 11

Inventories that are built up in advance of a peak selling season, a promotion program or a plant shut-down are known as:

Accepted Answer

A)  lot-size inventories 
B)  transportation inventories 
C)  safety stocks 
D)  anticipation inventories 
E)  none of the above 
A)  lot-size inventories 
B)  transportation inventories 
C)  safety stocks 
D)  anticipation inventories 
E)  none of the above

Question 12

Which of the following company objectives are in conflict?
I. Maximize customer service.
II. Low-cost plant operation.
III. Minimum inventory investment.

Accepted Answer

A)  I, II and III 
B)  I and II, not III 
C)  I and III, not II 
D)  II and III, not I 
E)  none 
A)  I, II and III 
B)  I and II, not III 
C)  I and III, not II 
D)  II and III, not I 
E)  none

Question 13

Which of the following are considered ordering costs?
I. Production control costs.
II. Lost capacity costs.
III. Risk costs.

Accepted Answer

A)  I, II and III 
B)  I and II 
C)  I and III 
D)  II and III 
E)  none of the above 
A)  I, II and III 
B)  I and II 
C)  I and III 
D)  II and III 
E)  none of the above

Question 14

If the annual cost of goods sold is $10,000,000 and the average inventory is $2,000,000, what is the turns ratio?

Accepted Answer

A)  $8,000,000 
B)  5 
C)  0.2 
D)  20% 
E)  cannot be calculated from the information given 
A)  $8,000,000 
B)  5 
C)  0.2 
D)  20% 
E)  cannot be calculated from the information given

Question 15

Of the following statements:
I. 'A' items usually account for about 70%−80% of the total usage value.
II. About 50% of the items usually account for 50% of the value.
III. 'C' items should be given the top priority in inventory management.

Accepted Answer

A)  I and II are true 
B)  II and III are true 
C)  I and III are true 
D)  only III is true 
E)  only I is true 
A)  I and II are true 
B)  II and III are true 
C)  I and III are true 
D)  only III is true 
E)  only I is true

Question 16

Which of the following equations is correct?

Accepted Answer

A)  Assets = liabilities + revenue 
B)  Profit = revenue + owners equity 
C)  Liabilities = assets - owners equity 
D)  Revenue = accounts receivable - liabilities 
A)  Assets = liabilities + revenue 
B)  Profit = revenue + owners equity 
C)  Liabilities = assets - owners equity 
D)  Revenue = accounts receivable - liabilities

Question 17

Given the following information, calculate the inventory turns.
Sales = $200,000,000
Cost of sales = $160,000,000
Average inventory = $ 40,000,000
Carrying cost = 12%

Accepted Answer

A)  0.20 
B)  0.25 
C)  4.0 
D)  5.0 
A)  0.20 
B)  0.25 
C)  4.0 
D)  5.0

Question 18

Which of the following would not be considered work-in-process inventory?
I. Finished goods in the stockroom.
II. Processed material waiting for inspection.
III. Raw materials not issued.
IV. Components in queue ahead of a milling machine.

Accepted Answer

A)  I and II 
B)  I and III 
C)  I and IV 
D)  II and III 
A)  I and II 
B)  I and III 
C)  I and IV 
D)  II and III

Question 19

All of the following are reasons to keep inventory EXCEPT:

Accepted Answer

A)  Allow flexibility in production scheduling 
B)  Couple supply with demand 
C)  Meet fluctuations in product demand 
D)  Provide a safeguard against delivery time variations 
A)  Allow flexibility in production scheduling 
B)  Couple supply with demand 
C)  Meet fluctuations in product demand 
D)  Provide a safeguard against delivery time variations

Question 20

Select the one best of the following statements:

Accepted Answer

A)  inventories allow manufacturing to level out production and to satisfy peak demand 
B)  inventories allow manufacturing to reduce production runs, reducing unit cost 
C)  inventories allow manufacturers to operate different work centers at the same output 
D)  all the above are true 
E)  none of the above is true 
A)  inventories allow manufacturing to level out production and to satisfy peak demand 
B)  inventories allow manufacturing to reduce production runs, reducing unit cost 
C)  inventories allow manufacturers to operate different work centers at the same output 
D)  all the above are true 
E)  none of the above is true

Which of the following would NOT be included in calculating inventory carrying costs?

Delivery of goods from a supplier is in transit for 14 days. If the annual demand is 2600 units, what is the average annual inventory in transit?

Which of the following statements is best about inventory management?

Which of the following are reasons for keeping inventory? I. To allow for goods in transit. II. To build up stock for seasonal demand. III. To reduce production costs. IV. To guard against uncertainty in supply and demand.

Which of the following statements is NOT true?

A company carries an average annual inventory of $1,000,000. If the cost of capital is 10%, storage costs are 8%, and risk costs are 7%, what does it cost per year to carry this inventory?

Items that are purchased or manufactured in quantities greater than needed immediately create Inventories:

If there are 20 working days in a month, the monthly usage is 660 units, and there are 100 units on Hand, approximately how many days' supply are there?

Which of the following costs would NOT be included in the cost of placing an order?

Which of the following statements is best?

Inventories that are built up in advance of a peak selling season, a promotion program or a plant shut-down are known as:

Which of the following company objectives are in conflict? I. Maximize customer service. II. Low-cost plant operation. III. Minimum inventory investment.

Which of the following are considered ordering costs? I. Production control costs. II. Lost capacity costs. III. Risk costs.

If the annual cost of goods sold is $10,000,000 and the average inventory is $2,000,000, what is the turns ratio?

Of the following statements: I. 'A' items usually account for about 70%−80% of the total usage value. II. About 50% of the items usually account for 50% of the value. III. 'C' items should be given the top priority in inventory management.

Which of the following equations is correct?

Given the following information, calculate the inventory turns. Sales = $200,000,000 Cost of sales = $160,000,000 Average inventory = $ 40,000,000 Carrying cost = 12%

Which of the following would not be considered work-in-process inventory? I. Finished goods in the stockroom. II. Processed material waiting for inspection. III. Raw materials not issued. IV. Components in queue ahead of a milling machine.

All of the following are reasons to keep inventory EXCEPT:

Select the one best of the following statements:

Introduction to Materials Management

Production Planning System

Master Scheduling

Material Requirements Planning

Capacity Management

Production Activity Control

Purchasing

Forecasting

Order Quantities

Independent Demand Ordering Systems

Physical Inventory and Warehouse Management

Physical Distribution

Products and Processes

Lean Production

Total Quality Management

Filters

Exam 9: Inventory Fundamentals

Which of the following would NOT be included in calculating inventory carrying costs?

Delivery of goods from a supplier is in transit for 14 days. If the annual demand is 2600 units, what is the average annual inventory in transit?

Which of the following statements is best about inventory management?

Which of the following are reasons for keeping inventory? I. To allow for goods in transit. II. To build up stock for seasonal demand. III. To reduce production costs. IV. To guard against uncertainty in supply and demand.

Which of the following statements is NOT true?

A company carries an average annual inventory of $1,000,000. If the cost of capital is 10%, storage costs are 8%, and risk costs are 7%, what does it cost per year to carry this inventory?

Items that are purchased or manufactured in quantities greater than needed immediately create Inventories:

If there are 20 working days in a month, the monthly usage is 660 units, and there are 100 units on Hand, approximately how many days' supply are there?

Which of the following costs would NOT be included in the cost of placing an order?

Which of the following statements is best?

Inventories that are built up in advance of a peak selling season, a promotion program or a plant shut-down are known as:

Which of the following company objectives are in conflict? I. Maximize customer service. II. Low-cost plant operation. III. Minimum inventory investment.

Which of the following are considered ordering costs? I. Production control costs. II. Lost capacity costs. III. Risk costs.

If the annual cost of goods sold is $10,000,000 and the average inventory is $2,000,000, what is the turns ratio?

Of the following statements: I. 'A' items usually account for about 70%−80% of the total usage value. II. About 50% of the items usually account for 50% of the value. III. 'C' items should be given the top priority in inventory management.

Which of the following equations is correct?

Given the following information, calculate the inventory turns. Sales = $200,000,000 Cost of sales = $160,000,000 Average inventory = $ 40,000,000 Carrying cost = 12%

Which of the following would not be considered work-in-process inventory? I. Finished goods in the stockroom. II. Processed material waiting for inspection. III. Raw materials not issued. IV. Components in queue ahead of a milling machine.

All of the following are reasons to keep inventory EXCEPT:

Select the one best of the following statements:

Introduction to Materials Management

Production Planning System

Master Scheduling

Material Requirements Planning

Capacity Management

Production Activity Control

Purchasing

Forecasting

Order Quantities

Independent Demand Ordering Systems

Physical Inventory and Warehouse Management

Physical Distribution

Products and Processes

Lean Production

Total Quality Management

Filters