GL CH8

___ stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time. a. Buffer b. Base c. Pipeline d. Speculative

a. Buffer

Which of the following statements about the lean approach and JIT is false? a. JIT tends to focus on product movement from manufacturer to retailer b. organizations should give careful consideration before adopting a lean philosophy c. the lean approach views inventory as waste d. trucking is an important mode of transportation in JIT systems e. all are true

a. JIT tends to focus on product movement from manufacturer to retailer

Under conditions of certainty, a reorder point is equal to: a. average daily demand in units times the length of the replenishment cycle b. safety stock plus an EOQ c. base stock plus safety stock d. base stock minus safety stock

a. average daily demand in units times the length of the replenishment cycle

Concerning the EOQ model, if demand or annual usage increases by 10%, then the EOQ will: a. increase b. decrease c. stay unchanged d. it depends on the particular product

a. increase

nventory flow diagrams illustrate that safety stock can prevent two problem areas, ____ and ____. a. increased rate of demand; longer-than-normal replenishment b. decreased rate of demand; shorter-than-normal replenishment c. increased rate of demand; shorter-than-normal replenishment d. decreased rate of demand; longer-than-normal replenishment

a. increased rate of demand; longer-than-normal replenishment

Which of the following is not an example of a lean inventory approach? a. Just-in-Time b. Collaborative Planning, Forecasting, and Replenishment c. Efficient Consumer Response d. Quick Response e. All of the above are lean inventory approaches

b. Collaborative Planning, Forecasting, and Replenishment

Holding high levels of inventory result in ____ inventory carrying costs and ____ stockout costs. a. High; high b. High; low c. Low; high d. Low; low

b. High; low

ABC analysis of inventory: a. Applies activity-based costing to managing inventory b. Recognizes that inventories are not of equal value to a firm c. Is synonymous with vendor-managed inventory d. Is an alternative to the EOQ model

b. Recognizes that inventories are not of equal value to a firm

Each of the following is a component of inventory carrying cost except: a. storage cost b. accounting cost c. shrinkage cost d. interest cost e. all are components

b. accounting cost

Inventory turnover can be calculated by: a. adding beginning and ending inventory; divide by two b. dividing the cost of goods sold by average inventory c. dividing average inventory by the cost of goods sold d. multiplying average inventory by 1.5 e. none of the above

b. dividing the cost of goods sold by average inventory

Inventory shrinkage: a. is another name for inventory turnover b. refers to the fact that more items are recorded entering than leaving warehousing facilities c. refers to situations where the size and/or volume of inventory is decreased over time d. refers to a technique of stabilizing unit loads by using shrink wrap packaging

b. refers to the fact that more items are recorded entering than leaving warehousing facilities

The EOQ determines: a. the point at which a company should reorder b. the point at which carrying costs equal ordering costs c. the point at which the sum of carrying costs and ordering costs is maximized d. the relevant inventory flow for a particular time period e. none of the above

b. the point at which carrying costs equal ordering costs

Inventory carrying costs in the United States in the twenty-first century have ranged between ____ and ____ percent. a. 10; 15 b. 15; 20 c. 20; 25 d. 25; 30

c. 20; 25

____ stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle. a. Psychic b. Speculative c. Base d. Pipeline

c. Base

___ refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns. a. Logistics b. Supply chain management c. Inventory d. Production

c. Inventory

Inventory costs in the United States in the twenty-first century represent approximately ____ of total logistics costs. a. One-fifth b. One-fourth c. One-third d. One-half

c. One-third

____ stock refers to inventory that is en route between various nodes in a logistics system. a. Base b. Safety c. Pipeline d. Speculative

c. Pipeline

Which of the following is not an assumption associated with the basic EOQ model? a. No inventory in transit b. An infinite planning horizon c. Stockouts are permitted d. A constant and known replenishment or lead time e. All are assumptions associated with the basic EOQ model

c. Stockouts are permitted

____ products refer to products that customers view as being able to fill the same need or want as another product. a. Copycat b. Cannibalized c. Substitute d. Complementary

c. Substitute

In the United States, ____ has traditionally provided a convenient starting point when estimating the interest charges associated with maintaining inventory. a. Gross Domestic Product growth b. Consumer Price Index c. The prime rate of interest d. The yield on US Treasury bills

c. The prime rate of interest

Dead inventory (dead stock) refers to product for which there is no sales during a ____ month period. a. Three b. Six c. Twelve d. Twenty-four

c. Twelve

Under ____, the size and timing of replenishment orders are the responsibility of the manufacturer. a. Quick Response b. Supply Chain Management c. Vendor-Managed Inventory d. Efficient Consumer Response

c. Vendor-Managed Inventory

The economic order quantity (EOQ) deals with calculating the proper order size with respect to ____ costs and ____ costs. a. order; stockout b. stockout; carrying c. carrying; ordering d. accounting; carrying

c. carrying; ordering

Concerning the EOQ model, if the ordering costs increase by 10% and the product value increases by 10%, then the EOQ will: a. increase b. decrease c. stay unchanged d. it depends on the particular product

c. stay unchanged

Which of the following situations is likely the most damaging (costly) with respect to a stockout? a. the customer buys a substitute product that yields a higher profit for the seller b. the customer buys a substitute product that yields a lower profit for the seller c. the customer goes to a competitor for this purchase d. the customer says "Call me when it's in"

c. the customer goes to a competitor for this purchase

___ recognizes that all inventories are not of equal value to a firm and thus all inventories should not be managed in the same way. a. Vendor-managed inventory b. Suboptimization c. Marginal analysis d. ABC analysis of inventory

d. ABC analysis of inventory

____ items refer to those that are used or distributed together. a. Me-too b. Substitute c. Co-branded d. Complementary

d. Complementary

____ stock is carried to stimulate demand. a. Base b. Speculative c. Attractive d. Psychic

d. Psychic

____ stock refers to inventory that is held for several reasons, to include seasonal demand, projected price increases, and potential shortages of product. a. Base b. Safety c. Pipeline d. Speculative

d. Speculative

Which of the following statements about service parts logistics is false? a. Customer expectations for service parts logistics continues to increase b. Some organizations outsource their service parts logistics to companies that specialize in this area c. Service parts logistics creates a variety of potential challenges for logisticians d. The worldwide economic slowdown of 2008 and 2009 caused a decreased emphasis on service parts logistics e. All of the above are true

d. The worldwide economic slowdown of 2008 and 2009 caused a decreased emphasis on service parts logistics

All of the following statements are true, except: a. in general, inventory carrying costs are expressed in percentage terms b. in general, companies prefer to carry less inventory as carrying costs increase c. inventory carrying costs consist of a number of different components or factors d. the importance of individual carrying costs factors (categories) is generally consistent from product to product e. all are true1.

d. the importance of individual carrying costs factors (categories) is generally consistent from product to product

Which of the following is not a component of ordering (order) costs? a. Costs of preparing invoices b. Costs of receiving orders c. Costs of verifying inventory availability d. Costs of conducting a credit check e. All are components of ordering (order) costs

e. All are components of ordering (order) costs

Which of the following is not a potential benefit to vendor-managed inventory (VMI)? a. reduced order errors b. improved demand forecasts c. reduced inventories d. fewer stockouts e. all are VMI benefits

e. all are VMI benefits

All of the following are suggestions for dealing with dead stock (inventory), except: a. aggressive marketing b. donate to charities c. make to order d. throwing it away e. all are suggestions

e. all are suggestions

Which of the following statements is false? a. with respect to stockouts, a delayed sale is virtually costless because of the customer's brand loyalty b. the higher the average cost of a stockout, the more inventory (safety stock) that should be held c. tradeoffs exist between carrying costs and stockout costs d. stockouts can be more costly than having too many items in stock e. all are true

e. all are true