Final Exam combined questions

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20) Which one of the following is TRUE for supply chain management? A) Supply chain applies to both manufacturing and service organizations. B) Supply chain applies only to manufacturing because it deals with flow of materials. C) Supply chain is about suppliers and does not include distributors or customers. D) Supply chain includes any operation that deals with materials.

37) Which of the following generates pressure to decrease inventories? A) inventory shrinkage costs B) backorders and stockouts C) transportation costs D) quantity discounts

39) Which of the following DOES NOT generate pressure to increase inventories? A) transportation costs B) backorders and stockouts C) inventory shrinkage costs D) quantity discounts

51) Which of the following is NOT a lever for reducing cycle inventories? A) place purchased item orders at fixed intervals B) reduce lot sizes for items moving in the supply chain C) streamline methods for placing orders and making machine set ups D) increase repeatability to eliminate the need for changeovers

53) A U.S. company faced with spiraling costs in their customer care center recreated that service in Luxembourg at a fraction of the cost. This is an example of: A) offshoring. B) forward integration. C) backward integration. D) postponement.

54) What is generally true about the class A SKUs in ABC analysis? They represent about: A) 20 percent of all SKUs. B) 30 percent of all SKUs. C) 20 percent of the dollar usage. D) 50 percent of the dollar usage.

58) The type of goods for which a responsive supply chain is appropriate are: A) fashion goods. B) products with a long shelf life. C) expensive products. D) those with infrequent design changes.

A company is considering making versus buying a part needed for manufacturing. Particulars are as follows: Make: Fixed Costs = $9,000 / year Variable Cost / Unit = $2 Buy: Fixed Costs = $3,000 / year Variable Cost / Unit = $5 Refer to the instruction above. For an annual volume of 3,000 units, which supplier should be chosen? A) Make B) Buy C) Either Make or Buy; costs are the same for either option at 3,000 units D) Can't be determined with information given

A company must decide if it will make or buy an item it needs. The company can make the item for $10 / unit, but must spend $15,000 per year in tooling to do so. An outside firm has quoted a total price of $12 / unit to supply the quantity required. Refer to the instruction above. What does the company save for the year by selecting this low-cost option (for annual requirements of 5,000 units)? A) $5,000 B) $15,000 C) $65,000 D) can't be determined with information given

Use the following to answer the questions below. Shipments of Product A from a distribution center to a retailer are made in lots of 350. The retailer's average demand for A is 75 units per week. Lead time from distributor to retailer is 3 weeks. The retailer pays for the shipments when they leave the distributor. The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350. 44) Refer to the instruction above. With the change in lead times, the pipeline inventory will: A) decrease by 75 units. B) increase by 50 units. C) decrease by 25 units. D) increase by 25 units.

Weeks of inventory and inventory turns are reflected in: A) working capital. B) operating expenses. C) cost of goods sold. D) cash flow.

Which location shift would qualify as forward placement? A) from the manufacturer to a distribution center B) from the retailer to the wholesaler C) from the wholesaler to the manufacturer D) from the retailer to the manufacturer

Which of the following is NOT identified in the text as a competitive advantage of a mass customization strategy? A) improvement of the quality of parts produced B) management of customer relationships C) elimination of finished goods inventory D) an increase in perceived value of services or products

Which one of the following statements about the relation between financial and supply-chain performance measures is TRUE? A) Longer delivery times require higher levels of working capital. B) Shorter new product development time decreases revenue. C) Higher inventory turns call for higher working capital requirements. D) Lower aggregate inventory value means higher current assets.

Which one of the following statements on inventory placement of finished goods is best? A) Forward placement might help reduce transportation cost. B) Forward placement is consistent with a competitive priority that calls for customization. C) Inventory pooling should be avoided when demand in various regions fluctuates month to month. D) Backward placement is consistent with a competitive priority that calls for fast delivery times.

________ uses a firm's flexible processes to generate a wide variety of personalized services or products at reasonably low costs. A) Mass customization. B) Channel assembly C) Postponement D) Forward integration

36) Which of the following generates pressure to increase inventories? A) inventory holding costs B) ordering costs C) storage and handling costs D) taxes and insurance

41) Items, such as components or assemblies, needed to manufacture a final product are called: A) quarantined materials B) work-in-process C) raw materials D) finished goods

52) Which of the following does not increase repeatability? A) parts standardization B) customization C) group technology D) flexible automation

55) An efficient supply chain typically has: A) a high capacity cushion. B) high inventory turns. C) supply chain partners that emphasize fast delivery time. D) supply chain partners that emphasize volume flexibility.

57) What is generally true about the class C SKUs in ABC analysis? They represent about: A) 20 percent of all SKUs. B) 50 percent of all SKUs. C) 15 percent of the dollar usage. D) 50 percent of the dollar usage.

A company is considering making versus buying a part needed for manufacturing. Particulars are as follows: Make: Fixed Costs = $9,000 / year Variable Cost / Unit = $2 Buy: Fixed Costs = $3,000 / year Variable Cost / Unit = $5 43) Refer to the instruction above. What is the annual break-even quantity for choosing between making and buying in this situation? A) 1,000 units B) 2,000 units C) 6,000 units D) 3,000 units

A company must decide if it will make or buy an item it needs. The company can make the item for $10 / unit, but must spend $15,000 per year in tooling to do so. An outside firm has quoted a total price of $12 / unit to supply the quantity required. Refer to the instruction above. Which alternative should be selected if annual requirements are 5,000 units? A) Make B) Buy C) Either make or buy; costs are the same for either option at 5,000 units D) Can't be determined with information given

A somewhat successful computer manufacturer makes a generic computer in five exciting colors. Once orders are received, the computer guts are encased in the customer's choice of colored case at the factory. This approach to production is known as: A) channel assembly. B) postponement. C) strategic sourcing. D) strategic production.

Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. Lead time from plant to wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant.49) Refer to the instruction above. Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 550 units? A) plant shipment lot size of 400 and plant-to-wholesaler lead time of 2 weeks B) plant shipment lot size of 500 and plant-to-wholesaler lead time of 3 weeks C) plant shipment lot size of 400 and plant-to-wholesaler lead time of 3 weeks D) plant shipment lot size of 600 and plant-to-wholesaler lead time of 4 weeks

The objective of a firm in a responsive supply chain is likely to be realized if it has a: A) standardized product. B) short lead time. C) low-capacity cushion. D) line-flow process.

40) Inventories needed for the production of services and goods (inputs to a firm's transformation processes) are called: A) quarantined materials B) work-in-process C) raw materials D) finished goods

54) An efficient supply chain should be preferred when: A) product variety is high. B) competitive priority is customization. C) demand is highly predictable. D) demand is unpredictable.

56) What is generally true about the class B SKUs in ABC analysis? They represent about: A) 20 percent of all SKUs and about 80 percent of the dollar usage. B) 80 percent of all SKUs and about 20 percent of the dollar usage. C) 30 percent of all SKUs and about 15 percent of the dollar usage. D) 50 percent of all SKUs and about 95 percent of the dollar usage.

A company is considering making versus buying a part needed for manufacturing. Particulars are as follows: Make: Fixed Costs = $9,000 / year Variable Cost / Unit = $2 Buy: Fixed Costs = $3,000 / year Variable Cost / Unit = $5 Refer to the instruction above. What does the company save for the year by selecting this low-cost option (for annual requirements of 3,000 units)? A) $5,000 B) $1,000 C) $3,000 D) Can't be determined with information given

A company must decide if it will make or buy an item it needs. The company can make the item for $10 / unit, but must spend $15,000 per year in tooling to do so. An outside firm has quoted a total price of $12 / unit to supply the quantity required. 40) Refer to the instruction above. What is the break-even point in this situation? A) 6,500 units B) 7,250 units C) 7,500 units D) 8,000 units

A firm may choose to use members of the distribution channel as if they were assembly stations in the factory. Such an approach is known as: A) backward integration. B) postponement. C) channel assembly. D) deferred delay.

A producer of medical devices makes a single model that can be customized to talk in and display any of 47 different languages. This customization is performed in one of their five regional distribution centers as firm orders are received, providing an elegant example of: A) backward integration B) forward integration C) channel assembly. D) offshoring.

A typical manufacturer spends: A) about 25% of its total income from sales on purchased services and materials. B) about 45% of its total income from sales on purchased services and materials. C) more than 60% of its total income from sales on purchased services and materials. D) almost 80% of its total income from sales on purchased services and materials.

Maple Leaf, Inc., a television manufacturer, would like to reduce its inventory. To this end, you are asked by the operations manager to assess its inventory level. You have the following information on average inventories from last year's financial statement: Raw materials $2,500,000 Work-in-process $1,000,000 Finished goods $ 800,000 In addition, the cost of goods sold last year (50 weeks) was $15 million. What was the inventory turnover? A) less than or equal to two B) greater than two but less than three C) greater than three but less than four D) greater than four

Padco averages $15 million worth of inventory in all of its worldwide locations. They operate 51 weeks a year and each week average $3 million in sales (at cost). Their inventory turnover is: A) 1.13 turns. B) 5 turns. C) 10.2 turns. D) 17 turns.

The average inventory at Hamilton Industries, comprising raw materials, work-in-process, and finished goods, was found to be $17.2 million last year. If the cost of goods sold per week averaged $1.32 million, what was the inventory turnover experienced by Hamilton Industries? Assume the company had 50 working weeks per year. A) less than or equal to 3.50 B) greater than 3.50 but less than 3.75 C) greater than 3.75 but less than 4.00 D) greater than 4.00

38) Which of the following DOES NOT generate pressure to decrease inventories? A) taxes and insurance B) inventory holding costs C) storage and handling costs D) ordering costs

42) Items sold to a firm's customers are called: A) quarantined materials B) work-in-process C) raw materials D) finished goods

53) One of the secondary levers for reducing pipeline inventory is to: A) offer seasonal pricing plans. B) increase capacity cushions. C) accept only large orders. D) select more responsive suppliers.

55) What is generally true about the class A SKUs in ABC analysis? They represent about: A) 50 percent of all SKUs. B) 80 percent of all SKUs. C) 20 percent of the dollar usage. D) 80 percent of the dollar usage.

56) A responsive supply chain typically has: A) a low capacity cushion. B) high inventory turns. C) supply chain partners that emphasize low prices. D) supply chain partners that emphasize volume flexibility.

57) Responsive supply chains should be preferred when: A) product variety is low. B) demand is predictable. C) contribution margins are low. D) product variety is high.

Henderson Corporation is a supplier of alloy ball bearings to auto manufacturers in Detroit. Because of the specialized manufacturing process employed, considerable work-in-process and raw material inventories are created. The average inventory levels are $1,152,000 and $2,725,000, respectively. In addition, finished goods inventory is $3,225,000, and sales (at cost) for the current year are expected to be about $24 million. The inventory turnover that Henderson Corporation is currently expecting is: A) less than 2.0. B) greater than 2.0 but less than 2.5. C) greater than 2.5 but less than 3.0. D) greater than 3.0.

It is desirable for a firm in a responsive supply chain to have: A) low-capacity cushions. B) delivery by railroad. C) high-capacity utilization consistent with high-volume delivery. D) inventory investments as needed to enable fast delivery times.

Shipments of Product A from a distribution center to a retailer are made in lots of 350. The retailer's average demand for A is 75 units per week. Lead time from distributor to retailer is 3 weeks. The retailer pays for the shipments when they leave the distributor. The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350. 43) Refer to the instruction above. With the change in purchased quantities, the average cycle inventory will: A) decrease by 75 units. B) increase by 50 units. C) decrease by 25 units. D) increase by 25 units.

Shipments of Product A from a distribution center to a retailer are made in lots of 350. The retailer's average demand for A is 75 units per week. Lead time from distributor to retailer is 3 weeks. The retailer pays for the shipments when they leave the distributor. The distributor has agreed to reduce the lead time to 2 weeks if the retailer will purchase quantities of 400 per shipment instead of 350. 45) Refer to the instruction above. The net impact on the retailer will be: A) no net change in average cycle and pipeline inventories. B) a net average increase in cycle and pipeline inventories of 50 units. C) a net average decrease in cycle and pipeline inventories of 75 units. D) a net average decrease in cycle and pipeline inventories of 50 units.

Shipments of Product X from a plant to a wholesaler are made in lots of 600. The wholesaler's average demand for X is 100 units per week. Lead time from plant to wholesaler is 4 weeks. The wholesaler pays for the shipments when they leave the plant.50) Refer to the instruction above. Which of the following situations results in the wholesaler's total cycle plus pipeline inventories amounting to 400 units? A) plant shipment lot size of 500 and plant-to-wholesaler lead time of 3 weeks B) plant shipment lot size of 400 and plant-to-wholesaler lead time of 3 weeks C) plant shipment lot size of 600 and plant-to-wholesaler lead time of 4 weeks D) plant shipment lot size of 400 and plant-to-wholesaler lead time of 2 weeks

Some discount stores are able to sell items before they have to pay their suppliers, resulting in a negative: A) net profit. B) return on assets. C) number of inventory turns. D) cash-to-cash measure.

The supply chain management department of a major manufacturer pondered a particularly weighty make or buy decision for weeks, ultimately deciding to make, rather than buy. This decision resulted in increased: A) outsourcing. B) offshoring. C) postponement. D) backward integration.

52) Which of the following is not a benefit of outsourcing? A) comparative labor costs B) lower logistics costs C) reduction of transaction costs through use of the Internet D) technology transfer to another country or company

10) Reducing setup costs will increase the pressure to keep larger inventories.

False

13) Repeatability is an undesirable feature of some orders because they must be repeated until the order is filled correctly.

False

14) The primary lever to reduce anticipation inventory is to place orders closer to the time when they must be received.

False

16) A stock-keeping unit (SKU) is a specially designed container for holding a specific amount of an inventory item somewhere along the supply chain.

False

18) When using ABC analysis, class C SKUs should be reviewed frequently.

False

2) When looking at inventory management, the term "lot size" refers to the physical dimensions of the area where the inventory is stored.

False

20) EOQ should be used if you use a make-to-order strategy and the customer specifies the entire order be delivered in one shipment.

False

22) The EOQ is the smallest lot size that a supplier will allow a customer to order.

False

24) Considering the EOQ model, smaller lots are justified when holding costs are decreased.

False

26) Dependent demand items are those items for which demand is influenced by market conditions and is not related to inventory decisions for any other item held in stock.

False

28) If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the Inventory Position (IP) is the sum of the three, or 300 units.

False

31) A continuous review system is sometimes called a fixed interval reorder system.

False

6) One component of the ordering cost of inventory is shrinkage.

False

involves locating the stock closer to customers at a warehouse, distribution center, or retailer.

Forward placement

a reduction in inventory and safety stock because of the merging of variable demands from customers.

Inventory pooling

the annual sales at cost divided by the average aggregate inventory value, is the number of times a year that a firm completely replenishes its inventory.

Inventory turnover (turns)

Seeks to develop a firm's supply chain to meet the competitive priorities of the firm's operations strategy

Supply chain design

the synchronization of a firm's process with those of its suppliers and customers to match flow of materials, services and information with demand

Supply chain management

1) Inventory management is the planning and controlling of inventories in order to meet the competitive priorities of the organization.

True

11) Increasing inventory levels can sometimes help a firm reduce both its inbound and outbound transportation costs.

True

12) A quantity discount is attractive because there is a drop in the price per unit when the order is sufficiently large.

True

15) A stock-keeping unit (SKU) is an individual item or product that has an identifying code and is held in inventory somewhere along the supply chain.

True

17) ABC analysis is a process for categorizing SKUs according to dollar usage so that managers can focus on items with the highest dollar value.

True

19) Cycle counting is an inventory-control method whereby storeroom personnel physically count a small percent of the total number of items each day.

True

21) EOQ should be used if you follow a make-to-stock strategy and the item has relatively stable demand.

True

23) As the annual demand increases, the EOQ also increases.

True

25) Considering the EOQ model, a reduction in ordering costs justifies reducing the lot sizes ordered.

True

27) Independent-demand items are those items for which demand is influenced by market conditions and is not related to inventory decisions for any other items held in stock.

True

29) If on-hand inventory = 100 units, scheduled receipts = 100 units and backorders = 100 units, the Inventory Position (IP) is 100 units.

True

3) When looking at inventory management, the term "lot size" refers to the quantity of an inventory item management either buys from a supplier or manufactures using internal processes.

True

30) A continuous review system is sometimes called a reorder point system

True

32) The scheduled receipts are orders that have been placed but not yet received.

True

33) As the service level increases, the probability of not running out of stock during a cycle decreases.

True

34) The two-bin inventory system is a type of visual system.

True

35) A periodic review system is a system in which an item's inventory position is reviewed periodically rather than continuously.

True

4) The primary reason for keeping inventories low is that inventory represents a temporary monetary investment in goods on which a firm must pay interest.

True

5) One component of the holding cost of inventory is interest.

True

7) A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

True

8) A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled later.

True

9) Setup cost is independent of order size.

True

is an inventory measure obtained by dividing the average aggregate inventory value by sales per week at cost.

Weeks of supply

The money used to finance ongoing operations

Working Capital

One way to gain control over suppliers in a chain is to buy a controlling interest in them, known as

backward integration

Cornelius Controlfreak insisted that his manufacturing plant also be the sole location for all finished goods inventory. If any customer placed an order, they knew it would come from the only place on Earth that had a ready supply, Cornelius' plant warehouse. ________ was alive and well thanks to this approach.

centralized placement

standardization in chunks

modular design

a concept whereby some of the final activities in the provision of a service or product are delayed until the orders are received.

postponement

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