LSCM 3960 Inventory Quiz - Part I

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All of the following are reasons for holding inventory EXCEPT: 1. Inventories enable the firm to achieve economies of scale. 2. Inventories eliminate the variation in supply and demand. 3. Inventories act as a buffer between critical interfaces within the channel of distribution. 4. Inventories enable specialization in manufacturing. 5. Inventories provide protection from uncertainties in demand in the order cycle.

2. Inventories eliminate the variation in supply and demand.

All the following are inventory risk costs EXCEPT: 1. shrinkage 2. damage 3. taxes 4. relocation costs 5. obsolescence

3. taxes

Pareto Analysis may be used to classify parts, customers, or activities. When determining the Pareto segments to classify parts, you should: 1. Identify 80% of the total value of all the parts as these will represent 20% of the part numbers. 2. Identify 20% of the inventory value as this will represent 80% of the part numbers. 3. Identify 80% of the number of parts as these will represent 20% of the inventory value. 4. There will rarely be a clean break at the 80% (or 20%) point so your cut-off is subjective. 5. Identify 20% of the part numbers as these will represent 80% of the inventory value.

4. There will rarely be a clean break at the 80% (or 20%) point so your cut-off is subjective.

Which of the following statements about just-in-time (JIT) is FALSE? A. JIT helps to reduce manufacturing cycle times. B. JIT has been defined as a philosophy that centers on the elimination of waste in the manufacturing process. C. JIT seeks to eliminate non-value-added activities. D. JIT helps a firm to reduce its overall material costs. E. JIT programs usually do not impact inventory turnover rates.

D. JIT helps a firm to reduce its overall material costs.

Seasonal stocks are NOT influenced by

EOQ

T/F: Increasing inventory turns from 10 to 15 has a greater impact than increasing inventory turns from 1 to 2.

False

T/F: Management will automatically achieve least total cost logistics by minimizing inventory carrying costs.

False

A DRP system is usually coupled with a _______ system in an attempt to manage the flow and timing of both inbound materials and outbound finished goods.

MRP

Which of the following is NOT a principle reason for holding finished goods inventory?

Prevention of production shutdowns due to parts shortages.

The type of functional inventory that helps a firm from being out of stock due to unexpected increases in demand is:

Safety stock

EXCESSIVE inventory levels will always lower corporate return on net worth by:

Tying up cash that could be used for other investment opportunities and/or reducing debt.

WIP inventories are

associated with manufacturing

If demand and lead time are constant, only___________ is necessary.

cycle stock

Dependent demand relates to

demand for another inventory item or product

Inventory and the GDP grew by ______ amounts between 1994 and 2010.

different

In the event of a "stockout" at your location, one of the things that could happen is

extra shipping cost may be incurred.

The objective of inventory management is to:

increase corporate profibility

Methods of decreasing inventory related costs include all of the following measures EXCEPT:

increasing the number of expedited orders

Methods of decreasing inventory related costs include all of the following measures EXCEPT:

increasing the number of expedited orders.


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