AP 3 Section A
A buyer has notified the material planner that a purchase order required in period 2 will not be received until period 3. The first action the planner should take is to
Check to see if safety stock will cover the requirement in period 2
A supplier has placed goods at a customer location, but does not receive payment until after the goods are consumed. This is an example of
Consignment
Which of the following conditions is most likely to trigger the material requirements planning (MRP) system to revise the material plan?
Cycle counting inventory adjustments are reported.
Which of the following statements is most true of raw material cycle counting?
Cycle counts should be made when no other transactions are being performed
What effect does a write off of inventory have on the company's profit and loss statement?
Decreases net earnings
Distribution replenishment requirements enter a manufacturer's planning hierarchy at which of the following planning processes?
Demand management
A small motor is used in an appliance production line, where the demand varies due to seasonality and is over-planned in the master schedule. The motor also has service part independent demand through a chain of repair shops, which varies by hours of product usage. Which of the following statements is true of the safety stock?
Dependent demand variability is ignored when determining safety stock
The carrying cost rate used in the economic order quantity (EOQ) is
Determined by management policy
Products that are close to their expiration date and cannot be sold at full price are known as
Distressed goods
Conducting business via electronic transfer of data and documents is considered
E-commerce
The information determined by a perpetual inventory system when an issue transaction is processed is the
Ending balance
Which of the following production environments is most likely to use actual cost?
Engineer-to-order
Which production environment most lends itself to lean principles, yet would not be applicable for the use of kanbans?
Engineer-to-order
An accounting assumption that the oldest inventory is the first to be used is
FIFO
A company packages in units of 100 per carton. Production yield averages 99%. What is the order quantity transmitted from master production scheduling to material requirements planning for a period order quantity of 1000 units?
1000
Last year a company had an average inventory of $24,000,000 and the cost of sales for the year was $48,000,000. The budget for the year shows the cost of sales increasing by 25%, with no increase in the average inventory. What inventory turns did the company have, and what will they need to have this year to meet the budget?
2 / 2.5
A favorable purchase price variance occurs when the standard cost is based on a 10-piece order quantity and
20 are ordered and there is a price break at 15
If the annual demand is 50,000 units, the ordering cost is $100 per order, the carrying cost is 20%, and the unit cost is $5, the annual ordering cost for an order quantity of 2500 is
2000
A purchased assembly is destruct-tested upon receipt. The sample size is 1% of the order quantity. The purchase order quantity to satisfy a production order of 200 units is
202
Using a 365 day year: If the cost of goods sold is $100,000 and the Average inventory is $ 55,000 then the average age of the inventory is
202
If safety stock is 1000, unit cost is $2, lead time is 12 weeks, service level is 90% and demand is 3000 per week, what is the reorder point?
37000
A company had a cost of goods sold of $500,000 and net sales of $800,000 in one year. Beginning inventory was valued at $50,000, and ending inventory at $60,000. What was the inventory turnover for the year?
9
Quantity in location A200 = 100 Allocated QNTY = 10 Reserved QNTY = 4 Cycle Count tolerance = +/5 The following information exists for a part. A cycle count has been done and a negative adjustment of two units was identified. The new balance of the item is
98
The target inventory level of a periodic review system is
A maximum
Material requirements planning will check for available inventory of a purchased part in an engineer-to-order environment because
A previous order for the part may have left residual inventory of the item due to lot size or price break, or a cancelled customer order
The most likely reason for establishing a financial tolerance when cycle counting is
A tolerance requires an override from management so the cause for error can be found
For which one of the following situations would the periodic review system be most appropriate?
A variety of goods in a retail store that are supplied by a single distributor
Which of the following priority rules is used within a dedicated assembly line?
First in, first out
An engineer-to-order environment produces large cabinets. One of the bulk items is used in all end items and has a limited point-of-use storage area. Which of the following ordering techniques is most likely to be used?
Fixed
Which of the following order techniques is likely to already incorporate a rounding factor for a part where inventory is in units and purchase orders are for cartons of 100?
Fixed
Which of the following inventory classifications most contribute to cycle time?
Active
A company is determining how much floor space to reserve in the layout for point-of-use storage in order to eliminate centralized storage. The inventory classifications the most useful for initial planning purposes are
Active and excess
The costing more commonly used for items imported for resale when substantial changes in the exchange rate are regularly experienced is
Actual
Using safety lead time for manufactured items will result in
An increase in work in process
Orders that provides the supplier with forward visibility of the requirements for a component are called
Blanket orders
A valid reason for carrying safety stock of a manufactured item is
Highly variable yields due to process control issues
The selection of a measure of customer service should include which of the following considerations? I. Are the necessary data available? II. Can the results be affected by management decisions? III. Do the results have an impact on productivity and profits?
I, II, and III
Inventory in excess of consumption that has not been used for a defined period is identified as
Inactive
Order point and periodic review are examples of which of the following reorder systems?
Independent demand
The reorder point technique is suitable for
Independent items
In a process industry, which of the following elements decouple the scheduling of sequential stages?
Inventory
A statement of a company's goals and approach to the management of inventories is the
Inventory policy
The use of bar-code technology in a manufacturing environment typically will have the LEAST effect in which of the following areas?
Inventory turns
Purchasing several items together in order to lower ordering costs is known as
Joint replenishment
Which of the following cost methods causes inventory valuation to decrease when costs increase?
LIFO
The cost that includes the product cost plus the costs of logistics, such as warehousing, transportation, and handling fees is the
Landed cost
During an inflationary period, the inventory valuation method that should be used to decrease taxes and increase cash flow is
Last in, first out (LIFO)
A primary advantage of lift trucks over conveyors is that
Lift trucks do not occupy space continuously
Storage considerations related to inventory accuracy are most likely to include:
Locked storage for high-value pilferable items
Which of the following ordering techniques lends itself to an engineer-to-order production environment where cost of obsolescence of unique items is a significant issue?
Lot
Which of the following order quantity techniques tends to most closely couple the master production schedule and purchasing performance?
Lot-for-lot
Which of the following types of inventory would understate inventory turns if included?
Maintenance, repair and operating supplies
Component lead time inaccuracies are causing an increase in customer backorders. This will most likely impact the
Master schedule
A common measure of a capacity planning process in a lean environment is
Minimal work-in-process between work centers
Inventory that has been superseded by a new model and will never be used or sold at full value is defined as
Obsolete
The number of exposures to stockouts can best be decreased if which of the following factors is increased?
Order quantity of replenishment orders
An advantage of over-forecasting a new assemble-to-order product during the growth phase as it relates to raw material inventory is
Over-forecasting improves customer service by increasing part availability
Part X has the following information before and after a cycle count. Which of the following statements is true of Part X's inventory accuracy from a financial perspective? Location Inv before Cycle count Inv After count % Diff Allowed % tolerance L01 50 80 +60% 2.0% L02 50 20 -60% 2.0%
Part X monetary value is accurate
A company is experiencing a change in demand from steady to sporadic. It currently uses economic order quantity (EOQ) to determine purchase quantities for a key component. Which of the following models should it use in the future?
Period order quantity
Which of the following computerized system's components is most necessary with a random location storage system?
Picking lists with locations
Maintaining physical control of point-of-use is accomplished by
Procedures
A company produces a variety of chocolate products on a repetitive basis to require less cleaning from one product to another. The most likely means of capacity planning is
Process train
A presentation of the flow of materials that shows equipment and inventories in a process industry is a
Process train
Which of the following is typically a significant benefit of using bar coded labels to identify parts and storage locations?
Product identification errors are reduced.
Which of the following inventory situations is most likely to change the projected available inventory balance from one material requirements planning run to another?
Quality hold
Material requirements planning has identified 20 C-item purchase orders that should be de-expedited by two weeks. Each order averages a two-month supply. Which of the following actions is most appropriate for the planner to take?
Receive the materials on the original due date
Uncontrollable inventory inaccuracies are most likely to be introduced into inventory when
Recording the amount received is based on the packing slip
Converting internal setup tasks to external tasks (for example, organizing tools and materials for setup while the machine is still running a batch), will:
Reduce set up time and increase an operation's throughput and velocity
Which of the following statements best explains how lean initiatives improve inventory accuracy?
Reduced inventory levels mean less chance of transaction errors
A min-max system is a variation of which of the following lot sizing techniques?
Reorder point
Which of the following actions is most likely to produce a high degree of sustained inventory data integrity?
Resolving problems exposed by cycle counting
A technique for manufacturers and retailers that experience high variability in demand for their products to buffer the overall burden of having to deploy inventory for each product is called
Risk pooling
The element of time added to normal lead time to protect against fluctuations in lead time is
Safety lead time
A sales department decides it needs to increase the target service level for the company's customers from 90% to 95%. What effect will this decision have on safety stock levels?
Safety stock levels will Increase
The most likely reason for a lean manufacturing company to have only one supplier that uses kanban and returnable packaging designed for a specific part is that
Schedule and delivery are overly-complicated with multiple suppliers
A company has an historical 2% failure rate at final test. The failed units cannot be reworked. Which of the following information should be used in material planning?
Scrap is 2% and is accounted for as an addition to the order quantity
Which of the following decisions is most likely to be made by the material planner?
Selection of a statistical, fixed or time period safety stock technique
The amount of time an item may be held in inventory before it becomes unusable is
Shelf life
Loss caused by scrap, theft, deterioration, or evaporation is known as
Shrinkage
Serialization of individual inventory lots for tracking location and cost is an example of
Specific identification
Which of the following accounting methods results in no change in inventory value regardless of whether material costs are increasing or decreasing?
Standard
The distribution center servicing a corner store chain initiated isolating food groups by storage temperature. This action represents competing with
Superior quality products
Which of the following reasons is most likely the cause for using safety lead time instead of safety stock?
Supply delivery reliability is the concern
In a min-max inventory system, inventory equal to the order point plus a variable order quantity is the
Target inventory level
A component stockout has occurred, and production has substituted a higher-priced alternate. What is the effect on cost variance?
The alternate is charged at standard cost so there is a total cost variance
Which of the following statements is most true of the differences between the inventory turns in a distribution center compared to the manufacturer of the goods in the distribution center?
The distribution environment has a higher cost of goods sold than does the manufacturer for the exact same finished good.
Which of the following impacts occurs when actual inventory of a part is greater than what the computer shows with respect to production?
The effect is to adjust inventory and keep production the same
The number of exposures to stockouts is related to
The number of replenishment orders
A make-to-stock company purchases parts that are unique to the company. The best reason for establishing a received quantity tolerance which closes a remaining open balance on the purchase order is
The parts are so inexpensive that dealing with a partial quantity is not cost effective
During a time of inflation, which of the following statements would be true if LIFO was used instead of FIFO to value inventory?
The value of inventory would be lower and cost of goods sold would be higher
An advantage of cycle counting over annual physical inventory is
Timely detection of problems
A company is required to provide lot traceability for all of its products. This means the company must be able to
Track every step of the process from supplier to customer
Geller manufacturers a full range of lighting fixtures for the home and office. These are shipped to four distribution centers that serve four areas of the country. Each distribution center has both automated and manual storage. Which of the following is MOST similar between these two areas?
Update of receipt to the host computer
A backlog in a make-to-order company contains a large number of orders of many unique items. In which of the following situations would selection of a random storage location most likely reduce overall efficiency?
When materials are for the same order
The inventory for a dependent demand item was incorrect during the last cycle count, and there is no safety stock. Which date from material requirements planning is of most use to the material planner to ensure availability of the part?
When the next planned order is scheduled
An advantage of pre-assigning storage locations upon receipt is
Zoning rules can be automatically applied by the computer
A synchronous pull system controls the velocity of flow through processes by using takt time. This results in:
an overall reduction of lead time
Accurate inventory levels are mostly influenced by which of the following items?
cycle counts
A company uses material requirements planning for an electronic product family. Which of the following ordering techniques is MOST likely to already incorporate the rounding factor for a part where inventory is in units and purchase orders are in cartons of 100?
fixed
The material requirements planning (MRP) logic will plan a receipt for an item with safety stock and a fixed order quantity when the projected available balance is less than:
the safety stock quantity
A process in which a supplier is responsible for maintaining customer inventory levels through regularly scheduled reviews of the on-site inventory is:
vendor-managed inventory.
