CSM Quiz 12

ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used.

False

ABC analysis divides on-hand inventory into three classes, generally based upon which of the following? A) item quality B) unit price C) the number of units on hand D) annual demand E) annual dollar volume

E

ABC analysis is based upon the principle that: A) all items in inventory must be monitored very closely. B) there are usually a few critical items, and many items that are less critical. C) an item is critical if its usage is high. D) more time should be spent on class "C" items because there are many more of them. E) as with grade distributions in many MBA courses, there should be more medium-level "B" items than either "A" or "C" items.

B

Cycle counting: A) is a process by which inventory records are verified once a year. B) eliminates annual inventory adjustments. C) provides a measure of inventory turnover. D) assumes that all inventory records must be verified with the same frequency. E) assumes that the most frequently used items must be counted more frequently.

B

Which of the following statements regarding control of service inventories is TRUE? A) Service inventory is a fictional concept, because services are intangible. B) Service inventory needs no safety stock, because there's no such thing as a service stockout. C) Effective control of all goods leaving the facility is one applicable technique. D) Service inventory has carrying costs but no setup costs. E) Good personnel selection, training, and discipline are easy.

C

All EXCEPT which of the following statements about ABC analysis are true? A) In ABC analysis, inventory may be categorized by measures other than dollar volume. B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume. C) ABC analysis is an application of the Pareto principle. D) ABC analysis suggests that all items require the same high degree of control. E) ABC analysis suggests that there are the critical few and the trivial many inventory items.

D

Among the advantages of cycle counting is that it: A) makes the annual physical inventory more acceptable to management. B) does not require the detailed records necessary when annual physical inventory is used. C) does not require highly trained people. D) allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory. E) does not need to be performed for less expensive items.

D

Which of the following statements about ABC analysis is FALSE? A) ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. B) In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C" items have. C) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items. D) ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can determine item classification in ABC analysis.

D

ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings.

False

According to the global company profile, Amazon.com's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations.

False

Cycle counting is an inventory control technique exclusively used for cyclical items.

False

Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management.

False

Work-in-process inventory is devoted to maintenance, repair, and operating materials.

False

A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

True

In ABC analysis, "A" items are the most tightly controlled.

True

In cycle counting, the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

True

In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

True

One advantage of cycle counting is that it maintains accurate inventory records.

True

One function of inventory is to take advantage of quantity discounts.

True

Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

True

The reorder point is the inventory level at which action is taken to replenish the stocked item.

True