Deck 8: Quantity and Inventory

Question 1

MRP II systems link the organization's planning processes with its financial system to produce "what if" scenarios to help achieve sales and profitability projections.

Answer 1

True

Question 2

Which statement is most accurate when thinking about deciding how much to buy::

A) managers seldom make purchase decisions until they are absolutely sure of the volume required.
B) balancing price, volume, carrying cost, and the cost of stockouts is key to successfully determining how much to buy at any point in time.
C) forecasts of future demand, lead times, and prices are usually fairly accurate.
D) the costs of placing orders and holding inventory are so low they do not significantly affect the decision of how much to buy
E) the price premium to attain the desired quantity is usually less than the costs of not having materials available when needed.

Answer 2

B

Question 3

The three main inputs of a material requirements planning MRP) system are:

A) an accurate bill of material, a master production schedule, and the inventory record.
B) required human resources, required machine resources, and available resources.
C) required manufacturing resources, a master production schedule, and required human resources.
D) results from Pareto analysis, inventory records and a master production schedule.
E) inventory records, annual sales forecast, and a master production schedule.

Answer 3

A

Question 4

For the supply management function, time-based strategies that impact competitive advantage relate to cycle time reductions and greater coordination of materials and information flows.

Question 5

Service coverage is the ability of purchasing to meet the needs of its internal customers.

Question 6

The basic elements of inventory carrying costs are capital costs, inventory service costs, storage space costs, and projected costs of lost sales..

Question 7

In fixed period inventory models, orders are placed when the reorder point is reached.

Question 8

"A" items in ABC analysis are:
A) commonly managed by carrying inventory.

A) reviewed infrequently.
B) particularly critical in financial terms.
C) normally carried in large quantities.
D) ordered infrequently.

Question 9

Stockout costs:

A) are easy to assess in most organizations.
B) can vary depending on whether it is a seller's or a buyer's market.
C) are about equal to or less than the cost of carrying additional inventory.
D) do not include present and future lost contribution on lost sales and customer goodwill because these are difficult to quantify.
E) are higher when it is a seller's market.

Question 10

In Kanban systems large raw material inventories are unnecessary.

Question 11

On an annual requirement of 100 items spread evenly throughout the year, any purchaser has an opportunity of buying all 100 units at a price of $100 each, or buying 10 units at a time at a price of $120. If the inventory carrying cost is 25 percent per year and assuming no ordering costs:

A) buying 100 at a time will save the company $2,500 per year.
B) buying 100 at a time will save the company $2,000 per year.
C) buying 100 at a time will save the company $1,100 a year.
D) buying 100 at a time will save the company $900 per year.
E) buying 100 at a time will save the company $200 a year.

Question 12

When a retailer uses daily sales of each product to identify patterns and to forecast inventory requirements, this is an example of:

A) a deterministic model.
B) a causal model.
C) a time series forecasting technique.
D) a qualitative forecasting technique.
E) a repetitive pattern modeling tool.

Question 13

CPFR is a business practice in which multiple trading partners agree to exchange knowledge and share risks to generate the most accurate forecast possible and develop effective replenishment plans.

Question 14

JIT requires infrequent deliveries of relatively large quantities in compliance with quality standards.

Question 15

When the carrying cost of inventory is expressed as a percentage:

A) it is usually the same as the borrowing cost of the organization.
B) the lower it is, the lower the economic order quantity.
C) it usually exceeds 57.5 percent per year.
D) it must exclude the insurance cost of inventory.
E) it is multiplied by the material unit cost to calculate the per unit carrying cost.

Question 16

Closed-loop MRP:

A) is a system which closes the loop between the supplier and the purchaser.
B) requires a feedback loop between purchasing and accounting.
C) provides a feedback loop between capacity and the master production schedule.
D) requires a check between the master production schedule and inventory.
E) allows a unit manager to sequence jobs done in that department.

Question 17

ABC analysis categorizes purchases or inventory into different groups, normally based on the value or impact on the profitability of the organization.

Question 18

Inventory use that is determined directly by customer orders is called:
A) derived demand.

A) scheduled demand.
B) dependent demand
C) anticipated demand.
D) independent demand.

Question 19

A buffer inventory:

A) protects against uncertainties in supply and demand.
B) is accumulated for a well-defined future need.
C) is held in anticipation of future needs.
D) covers demand that is expected in the future.
E) is carried to soften the impact of a significant price increase.