MATERIAL MANAGNMENT EXAM 3 CH 9-13 terms
When using the order point system which of the following is true? a. order quantities are usually fixed b. the order point depends upon the demand during the lead time plus safety stock c. time intervals between orders are constant
A.order quantities are usually fixed b. the order point depends upon the demand during the lead time plus safety stock (A and B)
Which of the following statements is best? a. the complexity of a warehouse operation will depend on the number of SKUs handled, the quantities of each SKU and the number of orders received and filled b. most of the activity in a warehouse is material handling c. warehouse management is NOT concerned with space utilization and effective use of labor and equipmen
A.the complexity of a warehouse operation will depend on the number of SKUs handled, the quantities of each SKU and the number of orders received and filled b. most of the activity in a warehouse is material handling (A and B)
Among other things the amount of safety stock carried will depend upon: a. the frequency of reorder b. the service level desired c. variability of demand during the lead time
ALL above
Which of the following statements is best regarding distribution channels? a. There are only two members in any distribution channel. b. The transaction channel is concerned with transfer of ownership. c. The distribution channel is concerned with the transfer of goods
B.The transaction channel is concerned with transfer of ownership. c. The distribution channel is concerned with the transfer of goods (B and C)
Which of the following is the best statement? a. a transaction occurs ONLY when goods are received or issued b. the steps in a transaction system are: identify the goods, verify quantity, record the transaction, and physically execute the transaction c. inventory is a tangible asset that is easy to lose track of unless properly controlled
B.the steps in a transaction system are: identify the goods, verify quantity, record the transaction, and physically execute the transaction C. inventory is a tangible asset that is easy to lose track of unless properly controlled (B and C)
The demand placed on a factory or a central warehouse by distribution centers is considered: a. dependent b. independent c. uniform
dependent
The distribution inventory management system which forecasts when the various demands will be made by the system on central supply is called: a. pull system b. push system c. distribution requirements planning d. inventory replenishment
distribution requirements planning
In the simple EOQ model annual inventory carrying costs and annual ordering costs vary: a. according to the time of year b. with seasonally adjusted demand c. with the order quantity
with the order quantity
A firm uses $20,000 of an item per year. The carrying cost is 25%, the cost of ordering is $10 and the order quantity is $1,000. The annual total cost of carrying plus ordering would be: a. $2,500 b. $5,000 c. $100 d. $325
$325
Using the POQ method of ordering, calculate the total cost of carrying and ordering inventory for the 6 week period shown. Use a POQ = 3 weeks for your answer. Week 1 2 3 4 5 6 Net requirements 60 40 10 50 20 30 Planned order receipts Ending inventory Cost to place an order = $100.00 Cost to carry inventory = $1.00 per unit per week Annual demand = 1,500 units Cost per unit = $200.00 Opening inventory = 0 units a. $140 b. $280 c. $340
$340
Given that the lead time is 1 week and the sigma is 100 units, if the lead time changes to 2 weeks then the sigma would change to about: a. 200 units b. 180 units c. 140 units
140 units
The average demand for an item is 1000 per month. The mean absolute deviation of monthly demand is 300 units. The MAD for yearly sales will be approximately: a. 3600 units b. 12,000 units c. 1040 units
1040 units
For a certain group of items, the cost of carrying inventory and the cost of placing orders is not exactly known but is about the same for all the items. The company has calculated K = 20 for these items. If one item has an annual demand (A) = $10,000 the NEW order quantity should be: a. $2,000 b. $10,000 c. $20,000
2,000
For a particular item the usage is 2000 units per year, the ordering cost is $10, the inventory carrying cost is 20% and the unit cost is $5. The economic order quantity is: a. 20 units b. 200 units c. 2000 units d. 400 units
200 units
If the standard deviation of demand is 100 units and the average demand is 1000 units, then we can be 95% confident that actual sales will be 1000 units plus or minus about: a. 100 units b. 150 units c. 200 units
200 units
If the lead time is 1 week, the review period 1 week, the average demand 100 units per week and the safety stock is 50 units, the target level will be: a. 150 units b. 250 units c. 200 units
250 units
A company carries an average annual inventory of $1,000,000. If the cost of capital is 10%, storage costs are 8%, and risk costs are 7%, what does it cost per year to carry this inventory? a. $100,000 b. $80,000 c. $70,000 d. $250,000
250,000
If there are 20 working days in a month, the monthly usage is 660 units, and there are 100 units on hand, approximately how many days' supply are there? a. 3 b. 5 c. 7 d. 33
3
The EOQ for an item is 5500 units and the annual demand is 78,000 units. What is the period order quantity? a. 14.18 b. 0.27 c. 3.67 d. 4
3.67
Given the following information, calculate the inventory turns. Sales = $200,000,000 Cost of sales = $160,000,000 Average inventory = $ 40,000,000 Carrying cost = 12% a. 0.20 b. 0.25 c. 4.0
4.0
If the annual cost of goods sold is $10,000,000 and the average inventory is $2,000,000, what is the turns ratio? a. $8,000,000 b. 5 c. 0.2 d. 20%
5
If the sum of the absolute deviations of demand was 500 for 10 periods, MAD would be: a. 5 b. 500 c. 50
50
If the lead time is 1 week, the review period 4 weeks, the average demand 100 units per week and the safety stock is 50 units, the target level will be: a. 550 units b. 200 units c. 500 units
550 units
For a given item the lead time is 1 week, the on hand inventory is 50 units, demand is 20 units per week, safety stock is set at 3 weeks supply and the item is ordered every 2 weeks. The order quantity should be: a. 70 units b. 60 units c. 50 units
70 units
If items were stacked against a wall as shown, the cube utilization would be: a. 100 percent b. 80 percent c. 120 percent
80 percent
If the on hand inventory is 40 units, the safety stock 20 units and the target level is 120 units then an order should be placed for: a. 100 units b. 80 units c. 60 units
80 units
Management states that they will tolerate one stockout every year for a specific item. If 10 orders are placed for the item each year the service level desired is: a. 80% b. 85% c. 90%
90 %
Management is willing to tolerate one stockout every 2 years for a specific item. If 10 orders are placed for the item each year the service level desired is: a. 80% b. 95%
95 %
Delivery of goods from a supplier is in transit for 14 days. If the annual demand is 2600 units, what is the average annual inventory in transit? a. 99.7 units b. 100 units c. 1.97 units
99.7 units
All of the following are reasons to keep inventory EXCEPT: a. Allow flexibility in production scheduling b. Couple supply with demand c. Meet fluctuations in product demand d. Provide a safeguard against delivery time variations
Couple supply with demand
Of the following statements: I. 'A' items usually account for about 70%−80% of the total usage value. II. About 50% of the items usually account for 50% of the value. III. 'C' items should be given the top priority in inventory management.
I. 'A' items usually account for about 70%−80% of the total usage value. Only I.
In a floating location system: I. Goods are stored wherever there is appropriate space for them. II. The same SKU may be stored in several locations at the same time. III. An accurate and up-to-date information system is required. IV. The system is appropriate for all warehouses.
I. Goods are stored wherever there is appropriate space for them. II. The same SKU may be stored in several locations at the same time. III. An accurate and up-to-date information system is required. (I,II ,and III)
Which of the following statements is best? I. It is not always practical to expect 100% inventory accuracy on all items. II. Variance is the amount of variation between an inventory record and a physical count. III. Tolerance is the amount of permissible variation between an inventory record and a physical count.
I. It is not always practical to expect 100% inventory accuracy on all items. III.Tolerance is the amount of permissible variation between an inventory record and a physical count. ( I and III )
Which of the following are reasons for keeping inventory? I. To allow for goods in transit. II. To build up stock for seasonal demand. III. To reduce production costs. IV. To guard against uncertainty in supply and demand.
I. To allow for goods in transit. II. To build up stock for seasonal demand. III. To reduce production costs. IV. To guard against uncertainty in supply and demand. ALL ABOVE - I,II,III and IV
Among other things a good physical control and security of inventory will depend on: I. A good part-numbering system. II. A well-trained work force. III. Free access to stock.
I.A good part-numbering system. II. A well-trained work force. (I and II)
In managing inventory, the problem is to balance the inventory investment with: I. Customer service. II. Costs associated with changing production levels. III. Costs of placing orders. IV. Transportation costs.
I.Customer service. II. Costs associated with changing production levels. III. Costs of placing orders. IV. Transportation costs. All above
Which of the following would not be considered work-in-process inventory? I. Finished goods in the stockroom. II. Processed material waiting for inspection. III. Raw materials not issued. IV. Components in queue ahead of a milling machine.
I.Finished goods in the stockroom. III. Raw materials not issued.
The three factors in good preparation for a physical inventory are: I. Housekeeping. II. Identification. III. Verification. IV. Training.
I.Housekeeping. II. Identification. IV. Training. ( I,II and IV )
Which of the following statements are true about inventory accuracy? I. Inventory accuracy is essential for planning. II. It is important to find the cause of record error. III. Periodic audits of inventory will find the cause of record error.
I.Inventory accuracy is essential for planning. II. It is important to find the cause of record error. (I and II)
Which of the following company objectives are in conflict? I. Maximize customer service. II. Low-cost plant operation. III. Minimum inventory investment.
I.Maximize customer service. II. Low-cost plant operation. III. Minimum inventory investment. ALL above
Which of the following are basic systems for determining when to order INDEPENDENT demand items? I. Order point system II. Periodic review system III. Material Requirements Planning
I.Order point system II. Periodic review system I and II
Which of the following are considered ordering costs? I. Production control costs. II. Lost capacity costs. III. Risk costs.
I.Production control costs and II. Risk costs
Which of the following are advantages of cycle counting? I. Timely detection and correction of problems. II. Reduction of loss of production. III. Making use of spare labor.
I.Timely detection and correction of problems. II. Reduction of loss of production. (I and II)
Which of the following are objectives of distribution inventory management? I. To provide the required level of customer service. II. To minimize the costs of transportation and handling. III. To always have enough of everything on hand so there are no stockouts. IV. To be able to interact with the factory so as to minimize scheduling problems.
I.To provide the required level of customer service. II. To minimize the costs of transportation and handling. IV. To be able to interact with the factory so as to minimize scheduling problems.
Which of the following systems are used to determine when the order point is reached? I. Two-bin system. II. Perpetual inventory system. III. Periodic inventory system
I.Two-bin system. II. Perpetual inventory system. (I and II)
Which of the following are causes of inventory record errors? I. Unauthorized withdrawals of material. II. Unsecured stockroom. III. Audit capability.
I.Unauthorized withdrawals of material. II. Unsecured stockroom. ( I and II )
_______ are materials that have entered the production process and ___________ are materials that are used in the production process but do not become part of the product. I. Raw materials II. Work in process III. Finished goods IV. Maintenance, repair, and operational supplies
II. Work in process and IV. Maintenance, repair, and operational supplies
Which of the following statements is best? I. The EOQ should be used with lumpy demand. II. Transportation cost should be included in the cost of ordering. III. Anticipation inventory should be built based on capacity and future demand.
II.Transportation cost should be included in the cost of ordering. III. Anticipation inventory should be built based on capacity and future demand.
Which of the following equations is correct? a. Assets = liabilities + revenue b. Profit = revenue + owners equity c. Liabilities = assets - owners equity d. Revenue = accounts receivable - liabilities
Liabilities = assets - owners equity
Select the description which most closely fits the term ORDER POINT: a. the time it takes to replenish an item in inventory. b. extra inventory of an item carried to protect against variations in demand during lead time c. a listing of components required to manufacture a product d. the time when an order should be placed
NONE
Which of the following statements is best? I. In a pull system central supply determines what is needed by the distribution centers II. In a push system all decisions are made by the distribution centers. III. An advantage of a pull system is the central coordination
NONE
_________ is an inventory record system that keeps a continuous account of transactions as they occur: a. Perpetual inventory system b. Periodic inventory system c. Two-bin system d. Safety stock system
Perpetual inventory system
Which of the following statements is most accurate? a. about 20% of the items will usually account for about 80% of the total value b. 'A' class items should have the tightest possible control c. the general rule using the ABC approach is to have plenty of everything in stock d. a and b only are true
a. about 20% of the items will usually account for about 80% of the total value b. 'A' class items should have the tightest possible control A and B only
In developing the standard economic order quantity formula the following assumption(s) is (are) made: a. demand for the item is relatively uniform b. replenishment is in lots or batches that arrive at once c. lead time is constant d. all of the above
a. demand for the item is relatively uniform b. replenishment is in lots or batches that arrive at once c. lead time is constant ALL ABOVE
Which of the following statements is best? a. order point = DDLT + SS b. average inventory = Q ÷ 2 + SS c. safety stock is always needed
a. order point = DDLT + SS b. average inventory = Q ÷ 2 + SS (A and B)
Which of the following statements is best? a. inventory is stored only on the floor b. a pallet position is a position where pallets are stored c. accessibility means being able to get at the goods with a minimum amount of work d. there is always a tradeoff between accessibility and cube utilization
accessibility means being able to get at the goods with a minimum amount of work
A supplier offers a quantity discount. Which of the following will influence the decision to accept the discount or not? a. purchase cost b. cost of carrying inventory c. cost of placing one order d. all above
all above
Cycle counting uses which of the following methods? a. ABC method b. zone method c. location audit method
all above
If a purchase discount is taken: 1. There is a saving in purchase cost. 2. Ordering costs are reduced. 3. Carrying costs are increased. 4. There is not necessarily a net saving. all above
all above
In a cycle counting system A items are usually: I. expensive items II. items which often experience imbalances III. difficult to get items
all above
The operating costs of a warehouse will depend on: I. The type of material handling equipment used. II. The stock location system used. III. The warehouse layout.
all above
The particular way materials move will depend upon: a. the channels of distribution the firm is using b. types of markets served c. characteristics of the product
all above
Which of the following are true when cycle counting inventory? I. Inventory should be audited for count and location. II. Cycle counts can be scheduled at regular intervals or special times. III. A good time to cycle count an item is when an order is placed.
all above
Which of the following is a principle of merchandise location in the warehouse? a. group functionally related items together b. group physically similar items together c. group fast-moving items together
all above
Which of the following statements are true about warehouse operation? I. The major operating cost is labor. II. Labor productivity depends on warehouse layout. III. Capital costs are those of transport and space.
all above
Which of the following statements is best? a. most demand patterns tend to be stable and predictable b. the most common predictable pattern is called a normal distribution c. the normal curve can be described by its average (mean) and the variation of actual demand about the average
all above
Which of the following statements is best? a. safety stock depends on the service level desired b. safety stock depends on the length of the lead time c. safety stock depends on the variation of demand during the lead time
all above
Which of the following costs are relevant to inventory management decisions? a. carrying costs b. ordering costs c. capacity-related costs d. all the above
all the above
Which of the following statements is best? a. among other things, warehousing labor productivity will depend on warehouse layout b. all warehouses need to keep accurate records of where each item is located c. the space required in a warehouse will depend on the amount of labor used
among other things, warehousing labor productivity will depend on warehouse layout
Inventories that are built up in advance of a peak selling season, a promotion program, or a plant shut-down are known as: a. lot-size inventories b. transportation inventories c. safety stocks d. anticipation inventories
anticipation inventories
Which of the following costs would NOT be included in the cost of placing an order? a. setup costs b. costs of placing a purchase order c. back-order costs
back-order costs
Which of the following techniques can be used to select items for cycle counting? a. count all items once a year. b. count only "A" and "B" items c. base the frequency of count on annual dollar usage d. count all items the same number of times a year e. make a random audit of the items.
base the frequency of count on annual dollar usage
A simple method of determining when an item should be cycle counted is: a. count when the item is ordered b. count each time the item is picked c. count each item once per month
count when the item is ordered
Assuming the cost per order is constant, increasing the order quantity will cause annual ordering costs to: a. decrease b. increase c. remain the same d. increase at a decreasing rate
decrease
Select the description which most closely fits the term SAFETY STOCK: a. the time it takes to replenish an item in inventory. b. extra inventory of an item carried to protect against variations in demand during lead time c. a listing of components required to manufacture a product d. the time when an order should be placed
extra inventory of an item carried to protect against variations in demand during lead time
Which of the following is NOT a method of order picking? a. area system b. floating location system c. zone system d. multi-order system
floating location system
Which of the following statements is correct? a. you must know the ordering cost to use the EOQ concept b. quantity discounts will not change the total inventory costs of the item c. inventory levels can be lowered by raising the order quantity d. if stock is not received all at once into inventory then EOQ formula can be modified and used
if stock is not received all at once into inventory then EOQ formula can be modified and used
If the order quantity is increased the annual cost of carrying inventory will: a. increase b. decrease c. remain the same
increase
Select the one best of the following statements: a. inventories allow manufacturing to level out production and to satisfy peak demand b. inventories allow manufacturing to reduce production runs, reducing unit cost c. inventories allow manufacturers to operate different work centers at the same output
inventories allow manufacturing to level out production and to satisfy peak demand
Which of the following is NOT an advantage of point-of-use storage? a. materials are readily accessible to users b. material handling is reduced or eliminated c. central storage costs are reduced d. inventory record accuracy is easier to maintain
inventory record accuracy is easier to maintain
Which of the following statements is true about safety stock? a. it must always be carried b. it depends only on the amount of demand c. it depends on the required service level all the above
it depends on the required service level
In a cycle counting system: a. all items are counted each month b. item counts are determined by their ABC classification c. the purpose is to correct inventory imbalances
item counts are determined by their ABC classification
Which of the following is NOT a basic stock location system? a. group functionally related items together b. locate all stock for fast access c. group fast-moving items together d. group physically similar items together e. locate working stock and reserve stock separately.
locate all stock for fast access
Items that are purchased or manufactured in quantities greater than needed immediately create ________ inventories: a. anticipation b. lot size c. hedge
lot size
Which of the following statements is best for inventory management? a. inventories and production can be managed separately b. inventory is not important at the production planning level c. inventories are usually insignificant on the balance sheet d. all the above are true e. none of the above is true
none of the above is true
Which of the following would NOT be included in calculating inventory carrying costs? a. capital costs b. ordering costs c. obsolescence costs d. all the above
ordering costs
In determining the economic order quantity (EOQ) the following costs are considered: a. costs of a stockout and ordering costs b. costs of a stockout and inventory holding costs c. ordering costs and inventory carrying costs d. ordering costs and costs of changing production levels e. inventory holding costs and costs of changing production levels
ordering costs and inventory carrying costs
An order system in which the order quantity is allowed to vary and the order cycle is fixed is called the: a. periodic review system b. two-bin system c. reorder point system d. red-tag system
periodic review system
Which of the following is NOT a cost of carrying inventory? a. capital costs b. storage costs c. purchase cost
purchase cost
Transportation inventories can be reduced by: a. reducing transportation time b. reducing order quantities c. increasing order quantities d. reducing the order point e. none of the above
reducing transportation time
Which of the following statements is NOT true? a. the annual cost of ordering depends on the number of orders per year b. the annual cost of ordering can be reduced by ordering less at any one time c. the annual cost of carrying inventory can be decreased by ordering less at one time
the annual cost of ordering can be reduced by ordering less at any one time
If the economic order quantity is to be calculated in DOLLARS, then: a. the annual demand must be stated in dollars b. ordering costs MUST be stated on a per UNIT basis c. carrying costs are stated in dollars per unit d. all the above
the annual demand must be stated in dollars
Which of the following is the best statement? a. stockouts do not cost money because customers are willing to wait b. the cost of a stockout will vary depending on the market served, the customer, and competition c. stockouts can occur at any time in the inventory cycle
the cost of a stockout will vary depending on the market served, the customer, and competition
Which of the following are NOT assumptions on which the economic order quantity (EOQ) is based? a. demand is relatively constant and known b. the item is produced continuously c. order preparation costs, inventory carrying costs and lead times are constant and known d. replacement occurs all at once
the item is produced continuously
While working a simple EOQ problem, you notice that, with a certain lot size, the annual ordering cost is exactly the same value as the annual inventory carrying cost. Which of the following is true? a. the lot size is the economic order quantity b. total cost is at its maximum c. the annual carrying cost will decrease if the order quantity is increased d. all of the above
the lot size is the economic order quantity
Using the periodic review system the target level is: a. forecast demand during lead time b. forecast demand during the review period c. the sum of a and b d. the sum of a and b plus the safety stock
the sum of a and b plus the safety stock
Select the description which most closely fits the term LEAD TIME: a. the time it takes to replenish an item in inventory b. extra inventory of an item carried to protect against variations in demand during lead time c. a listing of components required to manufacture a product d. the time when an order should be placed
the time it takes to replenish an item in inventory
Which of the following is correct? a. order quantities are fixed in the periodic review system b. the two-bin system is an example of the order point system c. the safety stock does not depend upon the frequency of reorder
the two-bin system is an example of the order point system
Which of the following is NOT a warehouse activity? receiving ,dispatching, identifying ,order picking ,or transportation.
transportation
Which of the following statements is best? a. two items with the same part number but in two different inventories would be one stock keeping unit (SKU) b. two white shirts of different sizes in the same inventory would be one SKU c. two items with the same part number in the same inventory would be one SKU d. all the above are true
two items with the same part number in the same inventory would be one SKU
