Deck 13: Purchasing, Inventory, and Quality Control

Question 1

When inventory level determines the time to order, the order quantity is a fixed amount called the _____.

A) incremental order
B) stockout quantity
C) standing order
D) economic order quantity

Answer 1

D

Question 2

What is the significance of the Federal Acquisition Streamlining Act?

A) It urges government agencies to buy off-the-shelf goods rather than items made to its own specifications.
B) It encourages the government to communicate with vendors with detailed paperwork rather than on-line.
C) It makes it easier for small companies to bid on non-federal contracts.
D) It makes the delivery of materials to the user at the time of production mandatory.

Answer 2

A

Question 3

Using _____, materials are delivered to the user exactly at the time they are needed for production.

A) supplier-based downsizing
B) just-in-time delivery
C) fully-integrated production networks
D) quality circles

Answer 3

B

Question 4

Mark wants to track his inventory from purchase to sale. He wants to automate this process. For this, he should use _____, which are derived from a language called symbologies and are used for specific identification of the objects.

A) bar codes
B) radio-frequency identifications
C) Six Sigma certifications
D) quality circles

Question 5

Which of the following is true about RFID?

A) It is derived from a language called symbologies.
B) It is a method of specific identification transponders.
C) The only disadvantage of RFID is that it cannot be read from a distance.
D) It is used for checking the quality of a company's inventory.

Question 6

A(n) _____ is a formal list of all the property of a business, or the property so listed.

A) purchase order
B) inventory
C) stockout
D) standing order

Question 7

_____ is carried to disconnect one segment of the operating system from another so that each part can operate at its optimum level.

A) Purchasing
B) Scheduling
C) Controlling
D) Inventory

Question 8

_____ is the quantity to purchase that balances the cost of placing the order with the cost of carrying the inventory.

A) Economic order quantity
B) Standing order
C) Stockout quantity
D) Purchase order

Question 9

Which of the following is one of the two current trends in purchasing that are causing considerable problems for small firms?

A) Lack of stockouts
B) Supplier-base upsizing
C) Weak demand for American products
D) Fully integrated production networks

Question 10

Which of the following refers to supplier-base downsizing?

A) Achievement of high standards by suppliers in a supply chain
B) Assigning the responsibility of supplying to one person
C) Reducing the number of suppliers to concentrate purchasing
D) Integrating supply and demand between many companies

Question 11

Which of the following is true of the 80-20 rule?

A) A company should order 80 percent of its supplies from one supplier, and the remaining 20 percent from other suppliers.
B) 80 percent of a company's income comes from 20 percent of its products.
C) The cost of raw materials should be about 80 percent of the cost of the finished product, and the cost of manufacturing should be about 20 percent of the cost of the finished product.
D) A company should schedule 80 percent of its production during 20 percent of the work week.

Question 12

_____ are sales lost because an item is not available in store when customers want it.

A) Stockouts
B) Economic order quantities
C) Inventory losses
D) Standing orders

Question 13

_____ is the process of coordinating the movement, storage, and all processes from beginning to end.

A) Supply chain management
B) Supplier-base downsizing
C) Promoting
D) Economic order quantification

Question 14

_____ set predetermined times to ship given quantities of needed products at a given price.

A) Purchase orders
B) Standing orders
C) Economic order quantities
D) Scheduled inventories

Question 15

A(n) _____ tells the supplier to ship a given amount of an item at a given quality and price.

A) purchase order
B) standing order
C) bill of lading
D) economic order quantity

Question 16

What is the advantage of using multiple sources of supply?

A) During shortages better services can be received.
B) Discounts can be obtained with low-volume buying.
C) The cost of ordering is low.
D) Greater variety of goods can be obtained.

Question 17

_____ is an integrated-coordinated system of activities to transform raw materials into finished products delivered to the end consumer.

A) Inventory control
B) Economic order
C) Quality circle
D) Supply chain

Question 18

Which of the following is true of assigning responsibility for purchasing?

A) Generally, one person should be given the overall purchasing responsibility.
B) The authority to order should only be with the business owner.
C) The person assigned the responsibility should not ask for help.
D) Responsibility for purchasing should not be assigned to anybody in case of stockouts.

Question 19

When can an optimum inventory level be maintained?

A) When the sum of the costs of carrying inventory and the costs of stocking out are high
B) When the costs of carrying inventory are high and the costs of stocking out are low
C) When the costs of carrying inventory are low and the costs of stocking out are high
D) When inventory carrying costs and stockout costs are zero

Question 20

Obtaining all items, including goods and services, in the proper form and at the proper place, time, and cost, is the main objective of:

A) promoting.
B) marketing.
C) purchasing.
D) scheduling.

Question 21

_____ are small work groups meeting periodically to find ways to improve features and performance.

A) Zero-defects teams
B) Informal groups
C) Quality circles
D) Standing committees

Question 22

The _____ is a nongovernmental bridging organization that establishes global barometers for quality.

A) World Trade Organization
B) National Institute of Quality
C) International Organization for Standardization
D) Small Business Administration

Question 23

Materials that have a high cost relative to revenue take up a large share of a small-business owner's time.

Question 24

_____ refers to product characteristics and the probability of meeting established standards.

A) Quality
B) Stockout
C) Variety
D) Economic order quantity

Question 25

_____ is setting the times and sequences needed to perform specialized activities.

A) Scheduling
B) Controlling
C) Purchasing
D) Procuring

Question 26

Just-in-time delivery increases inventory costs.

Question 27

_____ is a system used by a producer to ensure that the finished goods or services meet the expectations of customers.

A) Standing order
B) Quality circle
C) Quality control
D) Just-in-time management

Question 28

Which of the following is true of assessment of the quality of a product?

A) It depends on the expectations of the producer.
B) It is relative.
C) It is independent of the expectations of the customer.
D) It can always be measured objectively.

Question 29

Close coordination between the owner and the supplier can improve efficiency by shifting inventory costs to the distributors.

Question 30

The Federal Acquisition Streamlining Act prohibits government agencies from purchasing off-the-shelf items.

Question 31

Stockouts reduce inventory excesses and increase profits.

Question 32

Supplier-base downsizing means reducing the number of suppliers to concentrate purchasing.

Question 33

The management expert who condensed management philosophy and quality techniques into "14 points" was _____.

A) W. Edwards Deming
B) Malcolm Baldridge
C) Peter Drucker
D) Jack Welch

Question 34

The cost of materials and services needed to produce a product is usually one fourth of the revenue received for it.

Question 35

Fully integrated production networks aid U.S. companies in global operations.

Question 36

Which of the following can owners of small businesses use to cope with variations in demand?

A) Hire permanent workers during peak periods.
B) Do not subcontract production.
C) Avoid carrying complementary products, such as winter and summer items.
D) Use inventory buildups to smooth out operations.

Question 37

The responsibility for purchasing should be assigned to several people in the company to get the best quality items.

Question 38

Which of the following is true of the members of quality circles?

A) They are usually very senior-level managers.
B) They are generally the supervisors of their respective departments.
C) They usually do not get support from top management.
D) They receive training in problem identification and communications.

Question 39

Which of the following is one of Deming's 14 points?

A) Adopt the old philosophy.
B) Depend on mass inspection.
C) Award business on the basis of a price tag.
D) Break down barriers between departments.

Question 40

Purchasing for a manufacturing plant involves getting the proper materials and processing them into finished goods while maintaining inventory and quality control.

Question 41

The economic order quantity is determined by balancing the cost of placing an order with the costs of carrying that inventory in stock.

Question 42

It is impossible to determine the optimum lot size for items the company produces for itself.

Question 43

Small businesses should never subcontract production to deal with seasonal variations in demand.

Question 44

Receiving the ordered goods and placing them in inventory are the last steps in the purchasing procedure.

Question 45

Suppliers should be chosen to meet carefully set quality and service standards.

Question 46

Businesses that use a single source of supply for a material receive better service from the supplier than those that use many sources of supply.

Question 47

The amount of inventory after the sale of a finished product should be in balance with customer demand to minimize total costs.

Question 48

The ideal inventory level exists when items arrive just in time for sale to customers.

Question 49

Scheduling is setting the times and sequences needed to perform specialized activities.

Question 50

Standing orders simplify the purchasing procedure and allow for long-range planning.

Question 51

Issuing purchase orders creates legal records of purchase.

Question 52

Supplies for use in offices and shops should not be counted as inventory.

Question 53

The reason for carrying inventory is to disconnect one segment of the operating process from another so each part can operate at its optimum level.

Question 54

Small businesses should develop a rating system to select, evaluate, and retain suppliers.

Question 55

Opportunity costs are profits lost because money is tied up in inventory.

Question 56

High quality tends to result in lower production costs.

Question 57

According to the 80-20 rule, approximately 20 percent of a company's income comes from 80 percent of its products.

Question 58

There is no way to avoid carrying inventory, so the best an owner can do is manage its movement and control its costs.

Question 59

Suppliers should be chosen on the basis of price alone.

Question 60

Most small businesses are successful in purchasing when they use a single source of supply.

Question 61

How can an effective purchasing system be set?

Question 62

Which types of inventories do small firms carry? What is an ideal inventory mix?

Question 63

How can a small business control inventory?

Question 64

Explain why price should not be the only factor when choosing a supplier.

Question 65

Summarize the costs of carrying inventory.

Question 66

Explain why purchasing is important to a small business.

Question 67

Explain why only one person should be assigned the responsibility of purchasing.

Question 68

Explain what is involved in the purchasing process.

Question 69

Define the term "quality." How is it significant to a small business owner?

Question 70

What are the current trends in purchasing that are causing problems for small business owners?