Chapter 6

which of the following company objectives are in conflict? A. maximum customer service and low cost plant operation B. low cost plant operation and cash flow C. maximum inventory investment and customer service D. cash flow and profitability

A. maximum customer service and low cost plant operation

which of the following costs is relevant to inventory management decisions? A. run costs B. storage costs C. marketing costs D. new product development costs

b. storage costs

If the inventory turns ratio is 6 and the average inventory is 2.5 million, what is the annual cost of goods sold?

d. 15 million

inventory turns

measure of how effectively inventory is being used. Annual COGS/ Average inventory in dollars

Which of the following are costs of carrying inventory? A. capital costs and production control costs B.capital costs and storage costs C. production control costs and purchase costs D. storage costs and purchasing costs

B. capital costs and storage costs

what is the name given to inventories of items that are purchased or manufactured in quantities greater than needed immediately? A. fluctuation inventory B. lot-size inventory C. transportation inventory D. scheduled receipts

B. lot size inventory

which of the following costs will increase if order quantity is increased? A. annual cost of carrying inventory B. cost of ordering C. cost of manufacturing operations D. cost of customer service

A. annual cost of carrying inventory.

Which of the following statements is most accurate about inventory management? A. Inventories and production must be managed together B. inventory is not important at the production planning level C. inventories are usually insignificant on the balance sheet D. inventory does not cost much to carry

A. inventories and production must be managed together

which of the following are considered ordering costs? A.production control costs B.capital costs C.risk costs D.obsolescence costs

A. production control costs

Carrying costs

All costs attributable to the volume of inventory on hand

which of the following equations is correct? A. assets= liabilities- owners equity B. income= revenue- liabilities C. owners equity = assests - liabilities D. revenue = COGS - general and administrative costs

C. owners equity= assets- liabilities

What is the name of materials used in the production process that do not become part of the product? A. raw materials B. WIP C. finished goods D. Maintenance, repair, and operating supplies

D. maintenance, repair, and operating supplies

Largest component of inventory carrying costs

opportunity costs