Deck 11: The Inventory Process

Question 1

Which of the following represent risks associated with outsourcing?

A) Renegotiation risk.
B) Geopolitical risk.
C) Privacy of sensitive information.
D) All of the above are risks associated with outsourcing.

Answer 1

D

Question 2

Which of the following are software systems that expand an organization's reach outside to suppliers and customers?

A) Enterprise resource planning systems
B) Just in time inventory systems
C) Supply chain management systems
D) None of the above

Answer 2

C

Question 3

What is a characteristic of radio frequency identification (RFID) that makes it preferable to universal product codes (UPC)?

A) RFID codes can identify a class or type of product, and can identify an individual product as it moves along the supply chain.
B) RFID can only be used with enterprise resource planning (ERP) systems, while UPC cannot be used with ERP systems.
C) RFID tags are smaller than UPC tags and cannot be detached by the user.
D) None of the above are reasons the RFID is preferable to UPC.

Answer 3

A

Question 4

Which of the following represent authorization controls for information processing in the inventory process?

A) Written approval should be required before any item of equipment, materials, goods, or scrap can be removed from the plant facilities.
B) Inventory part or product numbers should be validated by check digits or by table/file look-up.
C) Access to inventory in the warehouse should be limited to only those individuals authorized by badge or biometrics.
D) Prenumbered documents should be used for all inventory adjustments, disposals, and work order requisitions.

Question 5

What is economic order quantity?

A) Maximum order quantity
B) A result of balancing holding costs against order costs
C) A quantity that is determined by the minimum holding cost
D) The sum of the safety stock and lead time stock

Question 6

Which of the following is NOT a reason for outsourcing?

A) Lower labor costs overseas.
B) Quality of the component will not decrease.
C) Loss of jobs in the home country.
D) Higher levels of technical knowledge in the third-party service provider's country.

Question 7

What is lead time?

A) The period of time between shipment of ordered goods and receipt
B) The time required by customers for receipt of goods purchased
C) The period of time between the ordering of a product and its receipt
D) The maximum time inventory is to remain on the shelf

Question 8

Which of the following does not represent an effective segregation of duties in the inventory process?

A) Responsibility for reviewing inventory evaluations and approving changes to inventory valuations (e.g., write-downs or write-offs) should be separated from the maintenance of perpetual inventory records.
B) Responsibility for reviewing inventory evaluations and approving changes to inventory valuations (e.g., write-downs or write-offs) should be separated from the maintenance of perpetual inventory records.
C) The functions of custody of inventory and the responsibility for the maintenance of the inventory master file records should be separated.
D) The clerks who handle maintenance of perpetual inventory records should also handle recording the receipt of shipments from vendors.

Question 9

What is the system called that uses technology to manage the purchase and receipt of merchandise in a manner that minimizes inventory on hand?

A) Enterprise resource planning systems (ERP).
B) Just-in-time inventory (JIT).
C) Inventory control modules (ICM).
D) Electronic data interchange (EDI).

Question 10

Which of the following is a leading supply chain management system?

A) Great Plains
B) Manugistics
C) ACCPAC
D) MAS90

Question 11

What is safety stock?

A) The quantity of inventory necessary to avoid the loss of sales due to stockout
B) The optimum order size to prevent a stockout
C) The quantity that minimizes inventory for "just in time" inventory
D) The sum of the lead time stock and stockout stock

Question 12

When is an order placed for additional products?

A) When the quantity available for sale reaches the stockout level
B) When quantity available for sale declines to the lead time stock level
C) When sales fall below the maximum stocking level
D) When inventory falls to the economic order quantity

Question 13

Which of the following is NOT an advantage of radio frequency identification (RFID)?

A) RFID may provide information allowing a credit card user to be identified or other surveillance unknown to the consumer.
B) RFID codes can identify a class or type of product, and can identify an individual product as it moves along the supply chain.
C) RFIDs codes can be scanned from further away than universal product codes (UPC), allowing for better tracking of inventory.
D) All of the above are advantages of RFIDs.

Question 14

Which of the following control activities would protect inventory from theft?

A) Limited access to the warehouse containing inventory.
B) Allowing only the inventory manager to authorize removal of items from the warehouse.
C) Only the shipping clerks can verify the shipments and deliver the items to the warehouse.
D) All of the above are control activities that would protect inventory from theft.

Question 15

What report is essential to organizations using "just in time" operations to minimize inventory?

A) Excess inventory report
B) Returns and allowances report
C) Inventory and PO aging report
D) Order recommendation report

Question 16

What type of control activity is the security system on an inventory warehouse?

A) Corrective.
B) Detective.
C) Preventive.
D) Corrective and detective.

Question 17

What report is essential to organizations using the "just in time" inventory approach?

A) Excess inventory report.
B) Returns and allowances report.
C) Inventory and PO aging report.
D) Order recommendation report.

Question 18

What is the most popular inventory control report?

A) Excess inventory report
B) Inventory turnover report
C) Sales and gross profit report
D) Order recommendation report

Question 19

Where does most of the data entry relating to inventory occur?

A) In the inventory and revenue processes.
B) In the revenue and financial processes.
C) In the revenue and purchasing processes.
D) In the inventory and purchasing process.

Question 20

Which of the following is not a common inventory problem for mercantile organizations?

A) Maintaining an economic level of inventory on hand
B) Avoiding obsolete inventory
C) Managing a selection of products to achieve satisfactory profitability
D) Determining the lead time for products

Question 21

All accounting system inventory control modules use a perpetual inventory system.

Question 22

Most data entry relating to inventory occurs in the inventory process.

Question 23

The purpose of the excess inventory report is to assure that sufficient inventory is on hand to meet sales demand.

Question 24

An inventory turnover report shows which products may need additional advertising or promotion in order to improve performance.

Question 25

If the sum of free stock and units on order equals the reorder point, the recommended order size is equal to the economic order quantity.

Question 26

Software systems that extend an organization's reach outside to suppliers and customers, managing the planning and flow of merchandise inventory, are known as supply chain management systems.

Question 27

The larger the quantity of safety stock, the larger the stockout cost.

Question 28

The reorder point is reached when the stock on hand equals the safety stock.

Question 29

Lead time is the period of time between the order of a product and receipt from the vendor.

Question 30

Two methods to account for inventory are flexible and static.

Question 31

To monitor the status of inventory receipts, a purchasing department must have a report that shows inventory on hand and committed along with open purchase orders and the date related merchandise is expected to be received.

Question 32

Most data entry relating to inventory occurs in the revenue and purchasing processes rather that in the inventory module.

Question 33

The economic order quantity is the order size that minimizes holding cost plus stockout cost.

Question 34

In a batch posting system, posting to the inventory master file is accomplished simultaneously with data entry.

Question 35

Lead time stock is that quantity of inventory deemed necessary to avoid the loss of sales due to stockouts.

Question 36

An ERP software encompasses all internal operations.

Question 37

Inventory management is one of the simplest AIS processes.

Question 38

The order excess inventory report calls attention only to those overstocked items that are important in dollar value.

Question 39

The maximum stocking level equals the economic order quantity.

Question 40

Because of the similarities in inventory processes of manufacturing organizations, treatment of inventory problems in the paper industry would be treated like those in the automobile manufacturing industry.

Question 41

Discuss output controls commonly found in the inventory process.

Question 42

Discuss ways that an organization can minimize the risks associated with outsourcing.

Question 43

What are the main activities in the inventory process for a mercantile organization?

Question 44

What are the end of period processing options in the inventory module?

Question 45

Discuss control activities related to the physical safeguarding of inventory.

Question 46

RFID codes have international standards.

Question 47

List three of the four tasks that supply chain management systems can perform.

Question 48

RFID codes hold more information than UPC codes, but cannot be scanned from as far away as UPCs.

Question 49

What are the tasks that supply chain management software can perform?

Question 50

List and discuss some reports that are used to help manage the inventory process.

Question 51

Define the following: lead time, safety stock, reorder point, ordering costs, economic order quantity.

Question 52

Name some factors that may cause management to deviate from an order size recommendation.

Question 53

The inventory manager should be the only person who has access to the inventory on hand.

Question 54

Discuss some of the risks associated with the inventory process.

Question 55

An important report in the inventory process is one that shows sales and gross profit by product.

Question 56

Discuss the advantages and disadvantages of radio frequency identification (RFID). Give two examples of companies who have implemented RFID systems.

Question 57

Discuss the benefits and risks of outsourcing that should be considered before enlisting a third party service provider.

Question 58

Discuss various activities in the inventory process.