Exam #3: Chapter 11 pt 1

In ABC analysis, which of the following items typically comprise 60 to 80 percent of total dollar usage but only 10 to 30 percent of the items? a. A b. B c. C d. B and C

a. A

Demand that is stable over time is called _____ demand. a. static b. dynamic c. statistical d. average

a. static

In a fixed-quantity system (FQS), as the reorder point increases: a. the safety stock increases. b. the safety stock decreases. c. the number of orders increases. d. the number of orders decreases.

a. the safety stock increases.

Which of the following is NOT TRUE regarding inventory management? a. The two fundamental inventory decisions are: where to order and what to order. b. Inventory management applies to goods and to services. c. Different types of inventory characteristics require different approaches for control. d. Stock-keeping units (SKUs) are often aggregated or partitioned into groups with similar characteristics or dollar value.

a. The two fundamental inventory decisions are: where to order and what to order. --> (WHEN and HOW MUCH)

Costs associated with configuring tools, equipment, and machines within a factory to produce an item are components of _____ costs. a.Ordering` b.inventory-holding c.shortage d.unit

a.Ordering`

A _____ is defined as the inability to satisfy the demand for an item. a. Reorder point b. Stockout c. Lost sale d. Backorder

b. Stockout

Demand that varies over time is called _____ demand. a. static b. dynamic c. statistical d. average

b. dynamic

_____ inventory consists of partially completed products in various stages of completion that are awaiting further processing. a. Raw materials b. Work-in-process (WIP) c. Cycle d. Safety stock

b. Work-in-process (WIP)

_____ inventory acts as a buffer between workstations in flow shops or departments in job shops to enable the operating process to continue. a.Raw materials b.Work-in-process c.Cycle stock d.Safety stock

b.Work-in-process

Costs associated with backordering products are called _____ costs. a.holding b.shortage c.ordering d.setup

b.shortage

Backorders: a. result from lost sales. b. have little financial impact. c. may occur as a result of a stockout. d. force a customer to purchase elsewhere.

c. may occur as a result of a stockout.

16. In ABC inventory analysis, which of the following is TRUE of class C items? a. Close control of Class C items (more than of class A or class B items) is required. b. Class C items are critical items that must be monitored with a fixed-period system as they have low unit costs and a high volume. c. Class C items make up a lower percentage of total dollar value than either class A or class B items. d. Class C items make up for 10 to 20 percent of inventory items and 60 to 80 percent of the total dollar usage.

c. Class C items make up a lower percentage of total dollar value than either class A or class B items.

Which of the following statements is TRUE? a. Inventory is any physical asset held for future use or sale. b. When using ABC analysis, C items require close control by operations managers as they account for a large dollar value but a relatively small percentage of total items. c. Dependent demand is directly related to the demand of other stock-keeping units (SKUs) and can be calculated without needing to be forecasted. Stockouts occur in a fixed-quantity system (FQS) whenever the lead-time demand exceeds

c. Dependent demand is directly related to the demand of other stock-keeping units (SKUs) and can be calculated without needing to be forecasted.

. In ABC inventory analysis, which of the following is TRUE of class A items? a.Class A items need not be closely controlled. b.Class A items account for 5 to 15 percent of the total dollar value. c.Class A items account for a relatively small percentage of total items. d.Class A items have a relatively low volume and low unit costs compared to Class C items.

c.Class A items account for a relatively small percentage of total items.

Which of the following statements is NOT TRUE? a.Inventory is any asset held for future use or sale. b.When using ABC analysis, "C" items comprise of a small dollar value. c.Stock keeping unit (SKU) is a single item or asset stored at multiple locations. d.The lead time is the time between placement of an order and its receipt.

c.Stock keeping unit (SKU) is a single item or asset stored at multiple locations.

Demand that incorporates uncertainty is called _____ demand. a.statistical b.average c.stochastic d.deterministic

c.stochastic

Inventory position is computed using all the following EXCEPT: a. on-hand quantity. b. scheduled receipts. c. backorders. d. lead-time demand.

d. lead-time demand. --> IP = OH +SR - BO

Which of the following is NOT a component of holding cost? a.Tax b.Insurance c.Material handling d.Order processing

d.Order processing

Independent demand: a.can be calculated. b.is related to other stock-keeping units (SKUs). c.is also called finished-goods inventory. d.needs to be forecasted.

d.needs to be forecasted.

Additional inventory that is kept over and above the average amount required to meet demand is called _____ inventory. a.seasonal b.work-in-process c.finished goods d.safety stock

d.safety stock