Deck 5: Inventory Management

Question 1

There are five primary functions of inventories. One of the following is incorrect. Which one?

A) Safety stocks
B) Seasonal inventories
C) Cycle stocks
D) Coupling
E) Pipeline inventory

Answer 1

D

Question 2

Since materials constitute the largest single percentage of their purchasing dollars, _____________ firms have turned to professionally operated purchasing departments to make sure they are getting full value for their outlays on materials.

A) service
B) manufacturing
C) profit oriented retailing
D) results oriented
E) retailing

Answer 2

C

Question 3

Independent demand is related to the demand for other items. In other words, an independent item must be forecasted independently.

Answer 3

False

Question 4

In the case of a manufacturing firm, you must consider whether the production process is ____________, ___________, or some hybrid of the two.

A) continuous / assembly line
B) make to order / make to stock
C) matrix / made to request
D) custom made / made to stock
E) made to order / made to specs

Question 5

The purchasing manager must have a clear understanding of the role of inventory in the ________ management system.

A) materials
B) supply
C) purchasing
D) distribution
E) production

Question 6

In order to manage the various types of inventory, attributes of the items first must be analyzed in terms of all the following with one exception. Which one is the exception?

A) cost
B) quality
C) lead time
D) past usage
E) the nature of demand

Question 7

The nature of demand is perhaps the most important attribute. The nature of demand can be either ___________ or ___________.

A) stable / unstable
B) increasing / decreasing
C) independent / unstable
D) independent / dependent
E) increasing / dependent

Question 8

The objective of an inventory system is the minimization of total operating costs. The unavoidable costs of operating pure inventory systems are ___________.

A) ordering costs, stocking costs, and holding costs
B) ordering costs, stocking costs, and holding costs
C) shipping costs, stockout costs, and pricing costs
D) ordering costs, delivery costs, and holding costs
E) ordering costs, stockout costs, and backorder costs

Question 9

Management of inventories is a major interest of purchasing managers.In many industries, the investment in inventories comprises a substantial share of the firm's assets. If the productivity of the inventory asset can be enhanced, the improvement will go directly to the bottom line.

Question 10

__________ is the life blood of any business. Most firms store thousands of different items.

A) Inventory
B) Buying
C) Human resources
D) Supplies
E) Capital

Question 11

The acronym "EOQ" is defined as _______________.

A) economic order quantity
B) economical order quantity
C) equal opportunity quantity
D) equal order quantity
E) economic organizational quantity

Question 12

In the area of inventory management, the purchasing professional should make explicit decisions regarding which of the following?

A) What to stock
B) How much to invest
C) How much service to offer
D) All the above
E) "A" and "B" only

Question 13

__________ inventory systems are distribution stocking points, such as warehouses or distributors.

A) Computerized
B) Management
C) Retail
D) Pure
E) Telzon

Question 14

The production-inventory taxonomy is based on _____________ producing standardized products through an assembly line, while ____________ are used to produce non standardized products through a job shop.

A) continuous systems / intermittent systems
B) intermittent systems / continuous
C) continuous systems / sustainable systems
D) robotic systems / intermittent systems
E) continuous systems / computer assisted systems

Question 15

If you analyze what sells the most and what cost the most, a predictable pattern will emerge with most distribution inventories.ertain items are demanded by a great many customers.Most items are only demanded by certain customers.Some items are demanded by few customers.s a result of this general pattern, a small percentage of the total item usage accounts for a large proportion of total usage value. It is hypothesized that ____ percent of the total inventory cost is vested in approximately ____ percent of the items.

A) 60 /40
B) 20 / 80
C) 80 / 20
D) 50 / 50
E) 70 / 30

Question 16

ependent demand is indirectly derived from demand for another inventoried item demand.

Question 17

The _________ function is taking on increasing importance in today's industrial economy.

A) financial
B) marketing
C) purchasing
D) operations
E) human resources

Question 18

The inventory items that are the most important for a specific industry or firm should be items that account for the greatest ___________.

A) number of sales
B) dollar value
C) mark-up
D) profit margin
E) total value

Question 19

The type of business a firm is in will usually determine how much of the firm's assets are invested in ___________.

A) fixtures
B) machinery
C) locations
D) inventories
E) buildings

Question 20

The classical EOQ model is based, in part, on four of the following assumptions. One of the following in not one of the assumptions. Which one?

A) Intermittent demand
B) Constant lead time
C) Constant unit price
D) Fixed order cost per order
E) Fixed holding cost per unit

Question 21

________ systems utilize substantially better information on future requirements than is possible by the traditional non-time-phased order-point system.

A) MPD
B) IRA
C) PRM
D) MRP
E) QTR

Question 22

In situations where discounts are not available, the price per unit is constant regardless of the number of units ordered.

Question 23

rom time to time, buying firms receive discounted price schedules from their suppliers. This usually means that the price per unit is lower if larger orders are purchased. It _____________ to the buyer's advantage to accept the quantity discount.

A) may be
B) may not be
C) is
D) may or may not be
E) could be

Question 24

ustomer demand is fairly uniform but, because of the build schedules, the requirements for the components are __________.

A) standard
B) stable
C) steady
D) lumpy
E) predictable

Question 25

__________ is needed to cover the demand during the replenishment lead time in case actual demand is greater than expected demand.

A) Lead time stocks
B) Random stocks
C) Safety stock
D) Warehouse stocks
E) Safety orders

Question 26

The buyer must be careful not to compromise the economies of his or her firm's ___________.

A) reputation
B) cost structure
C) strategic plans
D) production line
E) buying power

Question 27

The ______ concept provides the basis for projecting future inventories in a ____________ operation.

A) RAP / retailing
B) MRP / manufacturing
C) MAP / service
D) PDQ / manufacturing
E) AAP / auto service

Question 28

_______ can help improve the traditional non-time-phased order-point system because it allows the _____________ to plan requirements (raw material, component parts) to meet the final assembly schedule.

A) PDQ / buyer
B) MAPS / production manager
C) AAR / sales manager
D) MRA / purchasing manager
E) MRP / operating manager

Question 29

The classical EOQ model assumes that the per-unit material price is fixed. The quantity discount condition _______________ the total cost curve.

A) supports
B) validates
C) enhances
D) lowers
E) invalidates

Question 30

Setting safety stock so as to achieve a pre-specified service level enables fair comparison of the standard lot-sizing procedures.

Question 31

The ______ system provides information to better determine the quantity and timing of ___________ and ____________ than is possible with the non-time-phased order-point system.

A) PDQ / deliveries / purchase orders
B) MRA / deliveries / component parts
C) MPR / reorders / purchase orders
D) MPR / component parts / purchase orders
E) APR / component parts / purchase orders

Question 32

____________ (statistical inventory control) techniques are based on the assumption of uniform requirements per unit time. If this assumption of the demands is unrealistic, these techniques can lead to inappropriate inventory decisions.

A) Reorder point
B) Order-point
C) Order control
D) SICT
E) Telzon

Question 33

mong the better-known lot-sizing methods for the single item, non-discount, time-phased, certain-demand models are:
(1) lot for lot,
(2) economic order quantity,
(3) periodic order quantity,
(4) least unit cost,
(5) McLaren's order moment,
(6) Silver-Meal, and
(7) the Wagner-Whitin dynamic programming algorithm.

Question 34

The general __________ problem is to batch requirements to minimize the sum of ordering and carrying cost each time an order is to be placed.

A) buying
B) ordering
C) lot-sizing
D) transportation
E) cost analysis

Question 35

_______ systems are helpful for companies with assembled products that have component requirements dependent on the final product.

A) MRP
B) IRA
C) PDQ
D) MRA
E) ARA
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Power Point Slide 31

Question 36

___________ are extra inventory held to protect against randomness in demand or lead time.

A) Backorders
B) Warehouse stocks
C) Safety stocks
D) Random stocks
E) Lead time stocks

Question 37

________ method can easily be used for determining the minimum cost order quantity.

A) simple
B) complex
C) three-step
D) four-step
E) five-step

Question 38

or components of assembled products, the demands are not usually constant per unit time, and depletion is anything but gradual. Inventory depletion for component parts tends to occur in ____________.

A) random patterns
B) discernable patterns
C) predictable patterns
D) sharp inclines
E) discrete "lumps"