Question 1

Effective inventory management does not consider inventory-related costs.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is TRUE about the theory of constraints?

Accepted Answer

A)  TOC recognizes that EOQ is important. 
B)  TOC recognizes that lowering inventory decreases carrying costs and thus decreases operating expenses and improves net income. 
C)  TOC recognizes that lower inventories mean more defects. 
D)  TOC recognizes that lower inventories mean slower response to customers. 
A)  TOC recognizes that EOQ is important. 
B)  TOC recognizes that lowering inventory decreases carrying costs and thus decreases operating expenses and improves net income. 
C)  TOC recognizes that lower inventories mean more defects. 
D)  TOC recognizes that lower inventories mean slower response to customers.

Question 3

Which of the following costs are considered in the EOQ model?

Accepted Answer

A)  ordering costs 
B)  selling costs 
C)  carrying costs 
D)  both a and c 
A)  ordering costs 
B)  selling costs 
C)  carrying costs 
D)  both a and c

Question 4

When comparing the traditional approach of inventory management to JIT, which of the following statements is true?

Accepted Answer

A)  The traditional approach accepts the existence of setup costs, but not carrying costs or inventories. JIT accepts the existence of setup and carrying costs, but pushes for zero inventories. 
B)  The traditional approach accepts the existence of carrying costs and inventories, but not setup costs. JIT accepts the existence of setup costs but not carrying costs and pushes for zero inventories. 
C)  The traditional approach accepts the existence of both setup costs and carrying costs and attempts to find the order quantity that best balances those costs. JIT does not accept either setup costs or carrying costs and pushes for zero inventory levels. 
D)  The traditional approach does not accept carrying costs or setup costs. JIT minimizes both setup and carrying costs by finding the best order quantity to balance these costs. 
A)  The traditional approach accepts the existence of setup costs, but not carrying costs or inventories. JIT accepts the existence of setup and carrying costs, but pushes for zero inventories. 
B)  The traditional approach accepts the existence of carrying costs and inventories, but not setup costs. JIT accepts the existence of setup costs but not carrying costs and pushes for zero inventories. 
C)  The traditional approach accepts the existence of both setup costs and carrying costs and attempts to find the order quantity that best balances those costs. JIT does not accept either setup costs or carrying costs and pushes for zero inventory levels. 
D)  The traditional approach does not accept carrying costs or setup costs. JIT minimizes both setup and carrying costs by finding the best order quantity to balance these costs.

Question 5

Figure 20-3
The following information is available for Pullaway Trailer Company, which sells two products:
   There are 100 hours available in the plant and 75 square feet of vinyl available per operating period.
-Refer to Figure 20-3. Which of the following statements is INCORRECT?

Accepted Answer

A)  The materials constraint favors Trailer B over Trailer A. 
B)  The time constraint favors Trailer A over Trailer B. 
C)  The material constraint favors Trailer A over Trailer B. 
D)  The objective function favors Trailer B over Trailer A. 
A)  The materials constraint favors Trailer B over Trailer A. 
B)  The time constraint favors Trailer A over Trailer B. 
C)  The material constraint favors Trailer A over Trailer B. 
D)  The objective function favors Trailer B over Trailer A.

Question 6

Alabaster Manufacturing Company increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?

Accepted Answer

A)  no change 
B)  increase 
C)  decrease 
D)  cannot be determined 
A)  no change 
B)  increase 
C)  decrease 
D)  cannot be determined

Question 7

One of the traditional reasons for holding inventory is to avoid shutdowns due to defective parts. The JIT solution is to

Accepted Answer

A)  reduce setup costs. 
B)  reduce lead time. 
C)  use total preventive maintenance. 
D)  use total quality control. 
A)  reduce setup costs. 
B)  reduce lead time. 
C)  use total preventive maintenance. 
D)  use total quality control.

Question 8

Which of the following is NOT a step in the methodology for improving performance under the theory of constraints?

Accepted Answer

A)  exploit the binding constraints 
B)  subordinate everything else to the decisions made to exploit binding constraints 
C)  elevate the organization's binding constraints 
D)  analyze the product mix 
A)  exploit the binding constraints 
B)  subordinate everything else to the decisions made to exploit binding constraints 
C)  elevate the organization's binding constraints 
D)  analyze the product mix

Question 9

Figure 20-4
Montgomery Company produces A and B with contribution margins per unit of $40 and $30, respectively. Only 500 labor hours and 300 machine hours are available for production.
Time requirements to produce one unit of A and B are as follows:
  
-Refer to Figure 20-4. What is the constraint on labor hours for Montgomery Company?

Accepted Answer

A)  6A + 3B ≤ 500 
B)  6A + 2B ≤ 500 
C)  2A + 5B ≤ 300 
D)  40A + 30B ≤ 500 
A)  6A + 3B ≤ 500 
B)  6A + 2B ≤ 500 
C)  2A + 5B ≤ 300 
D)  40A + 30B ≤ 500

Question 10

JIT purchasing is done using

Accepted Answer

A)  short-term contracts emphasizing price. 
B)  long-term contracts based on quality, reliability, and price. 
C)  short-term contracts based on quality, reliability, and price. 
D)  inventory to hedge against stockouts and price increases. 
A)  short-term contracts emphasizing price. 
B)  long-term contracts based on quality, reliability, and price. 
C)  short-term contracts based on quality, reliability, and price. 
D)  inventory to hedge against stockouts and price increases.

Question 11

The Kanban system is used to

Accepted Answer

A)  ensure parts or materials are available when needed. 
B)  signal when preventive maintenance is needed. 
C)  signal when a defective unit has been produced. 
D)  ensure idle time of workers is not wasted. 
A)  ensure parts or materials are available when needed. 
B)  signal when preventive maintenance is needed. 
C)  signal when a defective unit has been produced. 
D)  ensure idle time of workers is not wasted.

Question 12

Figure 20 - 5
The Golden Wheels Trailer Company recorded the following information for two of their trailers:
     There are 100 hours available in the plant and 75 square feet of vinyl available per operating period.
-Refer to Figure 20-5. Which of the following statements is INCORRECT?

Accepted Answer

A)  The materials constraint favors Trailer B over Trailer A. 
B)  The time constraint favors Trailer A over Trailer B. 
C)  The objective function favors Trailer B over Trailer A. 
D)  The material constraint favors Trailer A over Trailer B. 
A)  The materials constraint favors Trailer B over Trailer A. 
B)  The time constraint favors Trailer A over Trailer B. 
C)  The objective function favors Trailer B over Trailer A. 
D)  The material constraint favors Trailer A over Trailer B.

Question 13

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100, 200, and 300 units of X, Y, and Z, respectively, what is the expected return?

Accepted Answer

A)  $36,000 
B)  $28,000 
C)  $120 
D)  $24,000 
A)  $36,000 
B)  $28,000 
C)  $120 
D)  $24,000

Question 14

JIT is a manufacturing approach focused on present demand rather than anticipated demand.

Accepted Answer

A) True 
 B)False

Question 15

A drummer is(are)

Accepted Answer

A)  the inventory needed to keep the constrained resource busy for a specified time interval. 
B)  the major binding constraint. 
C)  the minor binding constraint. 
D)  the actions taken to tie the rate at which materials are released into the plant (at the first operation) to the production rate of the constrained resource. 
A)  the inventory needed to keep the constrained resource busy for a specified time interval. 
B)  the major binding constraint. 
C)  the minor binding constraint. 
D)  the actions taken to tie the rate at which materials are released into the plant (at the first operation) to the production rate of the constrained resource.

Question 16

A linear programming problem has an objective function of 12X + 14Y. If the optimal solution provided by the model is to produce and sell 500 units of X and 1,250 units of Y, the expected return is

Accepted Answer

A)  $1,750. 
B)  $23,500. 
C)  $15,000. 
D)  $27,000. 
A)  $1,750. 
B)  $23,500. 
C)  $15,000. 
D)  $27,000.

Question 17

One of the traditional reasons for holding inventory is to avoid shutdowns due to unavailability of materials. The JIT solution is to

Accepted Answer

A)  reduce setup costs. 
B)  reduce lead time. 
C)  use long-term contracts with suppliers. 
D)  use total preventive maintenance. 
A)  reduce setup costs. 
B)  reduce lead time. 
C)  use long-term contracts with suppliers. 
D)  use total preventive maintenance.

Question 18

Which of the following is NOT an example of an ordering cost?

Accepted Answer

A)  receiving costs 
B)  salespeople's salaries costs 
C)  clerical costs of preparing documents 
D)  insurance costs on shipment 
A)  receiving costs 
B)  salespeople's salaries costs 
C)  clerical costs of preparing documents 
D)  insurance costs on shipment

Question 19

Dry Creek Company decreased the size of inventory order quantities that had previously been determined using the EOQ model. If demand remains the same, what is the impact on the number of orders made during the year?

Accepted Answer

A)  no change 
B)  increase 
C)  decrease 
D)  cannot be determined 
A)  no change 
B)  increase 
C)  decrease 
D)  cannot be determined

Question 20

The theory of constraints identifies a company's constraints and exploits them.

Accepted Answer

A) True 
 B)False

Effective inventory management does not consider inventory-related costs.

Which of the following is TRUE about the theory of constraints?

Which of the following costs are considered in the EOQ model?

When comparing the traditional approach of inventory management to JIT, which of the following statements is true?

Figure 20-3 The following information is available for Pullaway Trailer Company, which sells two products: There are 100 hours available in the plant and 75 square feet of vinyl available per operating period. -Refer to Figure 20-3. Which of the following statements is INCORRECT?

Alabaster Manufacturing Company increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?

One of the traditional reasons for holding inventory is to avoid shutdowns due to defective parts. The JIT solution is to

Which of the following is NOT a step in the methodology for improving performance under the theory of constraints?

JIT purchasing is done using

The Kanban system is used to

Figure 20 - 5 The Golden Wheels Trailer Company recorded the following information for two of their trailers: There are 100 hours available in the plant and 75 square feet of vinyl available per operating period. -Refer to Figure 20-5. Which of the following statements is INCORRECT?

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100, 200, and 300 units of X, Y, and Z, respectively, what is the expected return?

JIT is a manufacturing approach focused on present demand rather than anticipated demand.

A drummer is(are)

A linear programming problem has an objective function of 12X + 14Y. If the optimal solution provided by the model is to produce and sell 500 units of X and 1,250 units of Y, the expected return is

One of the traditional reasons for holding inventory is to avoid shutdowns due to unavailability of materials. The JIT solution is to

Which of the following is NOT an example of an ordering cost?

Dry Creek Company decreased the size of inventory order quantities that had previously been determined using the EOQ model. If demand remains the same, what is the impact on the number of orders made during the year?

The theory of constraints identifies a company's constraints and exploits them.

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility, Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Filters

Exam 20: Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Effective inventory management does not consider inventory-related costs.

Which of the following is TRUE about the theory of constraints?

Which of the following costs are considered in the EOQ model?

When comparing the traditional approach of inventory management to JIT, which of the following statements is true?

Figure 20-3 The following information is available for Pullaway Trailer Company, which sells two products: There are 100 hours available in the plant and 75 square feet of vinyl available per operating period. -Refer to Figure 20-3. Which of the following statements is INCORRECT?

Alabaster Manufacturing Company increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?

One of the traditional reasons for holding inventory is to avoid shutdowns due to defective parts. The JIT solution is to

Which of the following is NOT a step in the methodology for improving performance under the theory of constraints?

JIT purchasing is done using

The Kanban system is used to

Figure 20 - 5 The Golden Wheels Trailer Company recorded the following information for two of their trailers: There are 100 hours available in the plant and 75 square feet of vinyl available per operating period. -Refer to Figure 20-5. Which of the following statements is INCORRECT?

A linear programming problem has the following objective function: 20X + 40Y + 60Z. If the optimal solution provided by the model is to produce and sell 100, 200, and 300 units of X, Y, and Z, respectively, what is the expected return?

JIT is a manufacturing approach focused on present demand rather than anticipated demand.

A drummer is(are)

A linear programming problem has an objective function of 12X + 14Y. If the optimal solution provided by the model is to produce and sell 500 units of X and 1,250 units of Y, the expected return is

One of the traditional reasons for holding inventory is to avoid shutdowns due to unavailability of materials. The JIT solution is to

Which of the following is NOT an example of an ordering cost?

Dry Creek Company decreased the size of inventory order quantities that had previously been determined using the EOQ model. If demand remains the same, what is the impact on the number of orders made during the year?

The theory of constraints identifies a company's constraints and exploits them.

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Activity-Based Costing

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility, Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Filters