Verified Test Bank Inventory Management Sanders Chapter 9

File: ch09, Chapter 9: Inventory Management

Multiple Choice

1. The quantities of all products or materials in stock are known as ___________.
2. Finished goods
3. Raw materials
4. Inventory
5. Components
6. Buffer

Level: Easy

1. A form of manufacturing inventory is:
2. Skills
3. Office space
4. Work-in-process
5. Raw materials
6. c and d

Level: Medium: Difficult

1. ________ inventory represents all activities carried out in advance of a customer’s arrival.
2. Finished goods
3. Raw materials
4. Buffer
5. Components
6. Service

Level: Medium

1. Inventory policy addresses the basic questions of _____ and _____ to order:
2. Where and how much
3. Which supplier and how much
4. How many suppliers and how much
5. When to order and how much
6. None of the above

Level: Easy

1. Reasons to carry inventory include:
2. Balance supply and demand
3. Cover lead time demand
4. Operational independence
5. Buffer uncertainty
6. All of the above

Level: Easy

1. The inventory utilized during a production cycle is known as:
2. Cycle stock
3. Anticipation inventory
4. Pipeline inventory
5. MRO
6. None of the above

Level: Easy

1. In order to cushion against uncertainties in demand companies carry _______ inventory:
2. Cycle stock
3. Anticipation inventory
4. MRO
5. Safety stock
6. Pipeline inventory

Level: Easy

1. When marketing is planning a large promotion, a company might stock _______ inventory:
2. Cycle stock
3. Anticipation inventory
4. Pipeline inventory
5. MRO
6. None of the above

Level: Easy

1. __________ inventory must be accounted for even though it might not be in transit and not in stock.
2. Cycle stock
3. Anticipation inventory
4. MRO
5. Safety stock
6. Pipeline inventory

Level: Easy

1. Products that are used indirectly are known as ____________ inventory:
2. Cycle stock
3. Anticipation inventory
4. MRO
5. Safety stock
6. Pipeline inventory

Level: Medium/Easy

1. Costs that vary depending on the amount of inventory in stock are known as:
2. Ordering
3. Holding
4. Shortage
5. Interest
6. None of the above

Level: Medium

1. Taxes and opportunity costs of capital are examples of:
2. Fixed costs
3. Ordering costs
4. Holding costs
5. Shortage costs
6. None of the above

Level: Medium

1. _________ costs are generally fixed and include all aspects of procuring an item.
2. Variable costs
3. Ordering costs
4. Holding costs
5. Shortage costs
6. None of the above

Level: Medium

1. The costs of being out of stock and lost customer goodwill are known as:
2. Fixed costs
3. Ordering costs
4. Holding costs
5. Shortage costs
6. None of the above

Level: Medium

1. The fixed-order quantity inventory system assumes a ___________ demand rate.
2. Variable
3. Constant
4. Accelerated
5. Intermittent
6. Lagging

Level: Medium

1. A distinction of the _____________ inventory system is that inventory is monitored on a continual basis.
2. Fixed-time period
3. EOQ
4. Periodic
5. Fixed-order quantity
6. None of the above

Level: Difficult

1. In a _____________ inventory system, the order quantities vary during each period.
2. Fixed-time period
3. EOQ
4. Periodic
5. Fixed-order quantity
6. None of the above

Level: Medium

1. The fixed-order quantity inventory system is optimal for ____________ products:
2. Commodity
3. Functional
4. High-value
5. End of life
6. All of the above

Level: Medium

1. The fixed-period inventory system requires holding more __________ inventory:
2. Cycle
3. Safety stock
4. Pipeline
5. Anticipation
6. MRO

Level: Difficult

1. When seeking a responsive inventory system, the optimal choice would be:
2. Fixed-time period
3. EOQ
4. Periodic
5. Fixed-order quantity
6. None of the above

Level: Difficult

1. ___________ demand refers to the demand for components or subassemblies.
2. Independent
3. Variable
4. Manufacturing
5. Dependent
6. None of the above

Level: Easy

1. An example of an item at an automobile manufacturer that would call for independent demand analysis is:
2. Automobile
3. Engine
4. Windshield
5. Tires
6. Steel

Level: Medium

1. The relationship between independent and dependent demand for a product is typically outlined in:
2. EOQ model
3. Bill of materials
4. Sales and operations plan
5. MRP
6. None of the above

Level: Easy

1. The _______ inventory classification model allows a company to classify inventory based on degree of importance.
2. VMI
3. EOQ
4. ABC
5. MRP
6. ROP

Level: Easy

1. A significant advantage of vendor managed inventory (VMI) is:
2. More control for the vendor
3. Less financial investment for the customer
4. Collaboration between vendor and customer
5. All of the above
6. None of the above

Level: Easy

True/False

1. Inventory refers to the quantities of products or materials in stock.

Level: Easy

1. Inventory represents cash that cannot be utilized for other investments.

Level: Medium

1. Only manufacturing organizations carry inventory.

Level: Easy

1. Work-in-process is a form of manufacturing inventory.

Level: Difficult

1. In service organizations, people can be considered inventory.

Level: Medium

1. An organization’s inventory policy relates to where and how much to order.

Level: Medium

1. Inventory is costly, so the best policy is to carry little to no inventory.

Level: Difficult

1. It is necessary to carry inventory to cover the time between order of product and delivery.

Level: Medium

1. It may make sense for companies to hold larger quantities of inventory because of the benefits of economic purchase orders.

Level: Medium

1. Cycle stock inventory serves the purpose of providing a cushion for uncertainties in demand.

Level: Difficult

1. Companies may invest in anticipation inventory in preparation for a promotion or event.

Level: Easy

1. Holding costs of inventory are fixed depending on the amount of inventory in stock.

Level: Medium

1. The expenses of insuring product and product obsolescence are examples of holding costs.

Level: Easy

1. Ordering costs are typically fixed and can be reduced by ordering less frequently.

Level: Medium

1. The cost of a stock out could be greater than holding and ordering costs combined.

Level: Difficult

1. The fundamental questions for an inventory system include how much and when to order.

Level: Medium

1. A key aspect of the fixed-order quantity inventory system is defining a reorder point.

Level: Medium

1. The fixed-order quantity inventory system is also known as the EOQ model.

Level: Easy

1. Order quantities are fixed in the fixed-time period inventory system.

Level: Difficult

1. The optimal inventory system for high value items is the fixed-time period system.

Level: Difficult

1. When responsiveness is important, the optimal inventory system is the fixed-order quantity system.

Level: Difficult

1. The fixed-period inventory system typically requires holding greater safety stock.

Level: Difficult

1. The EOQ should minimize the sum of ordering and shortage costs.

Level: Medium

1. The reorder point (ROP) should be established to cover demand during lead time plus safety stock.

Level: Medium

1. Demand for a finished product is known as dependent demand.

Level: Easy

1. Dependent demand in a manufacturing organization relates to the demand for components or subassemblies.

Level: Easy

1. Companies utilize the EOQ model to derive quantities for dependent demand items.

Level: Difficult

1. In ABC inventory analysis, “C” items do not typically require managerial involvement.

Level: Easy

1. ABC analysis is useful to different varying service levels to different products.

Level: Medium

1. One advantage of vendor managed inventory is that the vendor has more control over its products.

Level: Easy

Essay

1. Briefly define holding costs and inventory costs, and explain the relationship between the two when defining an inventory policy

Level: Medium

1. Briefly describe the concept of the ABC inventory classification model.

Level: Easy