Chapter 6
which of the following company objectives are in conflict? A. maximum customer service and low cost plant operation B. low cost plant operation and cash flow C. maximum inventory investment and customer service D. cash flow and profitability
A. maximum customer service and low cost plant operation
which of the following costs is relevant to inventory management decisions? A. run costs B. storage costs C. marketing costs D. new product development costs
b. storage costs
If the inventory turns ratio is 6 and the average inventory is 2.5 million, what is the annual cost of goods sold?
d. 15 million
inventory turns
measure of how effectively inventory is being used. Annual COGS/ Average inventory in dollars
Which of the following are costs of carrying inventory? A. capital costs and production control costs B.capital costs and storage costs C. production control costs and purchase costs D. storage costs and purchasing costs
B. capital costs and storage costs
what is the name given to inventories of items that are purchased or manufactured in quantities greater than needed immediately? A. fluctuation inventory B. lot-size inventory C. transportation inventory D. scheduled receipts
B. lot size inventory
which of the following costs will increase if order quantity is increased? A. annual cost of carrying inventory B. cost of ordering C. cost of manufacturing operations D. cost of customer service
A. annual cost of carrying inventory.
Which of the following statements is most accurate about inventory management? A. Inventories and production must be managed together B. inventory is not important at the production planning level C. inventories are usually insignificant on the balance sheet D. inventory does not cost much to carry
A. inventories and production must be managed together
which of the following are considered ordering costs? A.production control costs B.capital costs C.risk costs D.obsolescence costs
A. production control costs
Carrying costs
All costs attributable to the volume of inventory on hand
which of the following equations is correct? A. assets= liabilities- owners equity B. income= revenue- liabilities C. owners equity = assests - liabilities D. revenue = COGS - general and administrative costs
C. owners equity= assets- liabilities
What is the name of materials used in the production process that do not become part of the product? A. raw materials B. WIP C. finished goods D. Maintenance, repair, and operating supplies
D. maintenance, repair, and operating supplies
Largest component of inventory carrying costs
opportunity costs