9. All of the following statements are true, except:

a. the importance of individual carrying costs factors (categories) is generally consistent from product to product

b. inventory carrying costs consist of a number of different components or factors

c. in general, companies prefer to carry less inventory as carrying costs increase

d. in general, inventory carrying costs are expressed in percentage terms

11. Inventory shrinkage ____.

b. refers to the fact that more items are recorded entering than leaving warehousing facilities

a. is another name for inventory turnover

c. refers to situations where the size and/or volume of inventory is decreased over time

d. refers to a technique of stabilizing unit loads by using shrink wrap packaging

12. Each of the following is a component of inventory carrying cost except:

e. all of the above are components

13. In the United States, ____has traditionally provided a convenient starting point when estimating the interest charges associated with maintaining inventory.

a. Gross Domestic Product growth

d. the yield on US Treasury bills

14. Which of the following is not a component of ordering (order) costs?

e. all are components of ordering (order) costs

c. costs of verifying inventory availability

d. costs of conducting a credit check

15. Which of the following situations is likely the most damaging (costly) with respect to a stockout?

c. the customer goes to a competitor for a purchase

a. the customer buys a substitute product that yields a higher profit for the seller

b. the customer buys a substitute product that yields a lower profit for the seller

d. the customer says, “Call me when it’s in”

16. Which of the following statements is false?

a. with respect to stockouts, a delayed sale is virtually costless to a company because of the customer’s brand loyalty

b. the higher the average cost for a stockout, the more inventory (safety stock) that should be held

c. tradeoffs exist between carrying costs and stockout costs

d. stockouts can be more costly than having too many items in stock

17. Under conditions of certainty, a reorder point is equal to ____.

a. average daily demand times the length of the replenishment cycle

c. base stock plus safety stock

d. base stock minus safety stock

19. The economic order quantity (EOQ) determines ____.

b. the point at which carrying costs equal ordering costs

a. the point at which a company should reorder

c. the point at which the sum of carrying costs and ordering costs is maximized

d. the relevant inventory flow for a particular time period

20. Which of the following is not an assumption associated with the basic economic order quantity (EOQ) model?

b. an infinite planning horizon

d. a constant and known replenishment or lead time

e. all are basic assumptions with the basic EOQ model

21. Concerning the EOQ model, if demand or annual usage increases by 10%, then the EOQ will ____.

a. it depends on the particular product

22. Concerning the EOQ model, if the ordering costs increase by 10% and the product value increases by 10%, then the EOQ will ____.

d. it depends on the particular product

23. Inventory flow diagrams illustrate that safety stock can prevent two problem areas, ____ and ____.

d. increased rate of demand; longer-than-normal replenishment

a. decreased rate of demand; longer-than-normal replenishment

b. increased rate of demand; shorter-than-normal replenishment

c. decreased rate of demand; shorter-than-normal replenishment

25. ABC analysis of inventory ____.

b. recognizes that inventories are not of equal value to a firm

a. applies activity-based costing to managing inventory

c. is synonymous with vendor-managed inventory

d. is an alternative to the EOQ model

27. All of the following are suggestions for dealing with dead stock (inventory), except ____.

e. all of the above are suggestions

28. Inventory turnover can be calculated by ____.

a. dividing the cost of goods sold by average inventory

b. dividing average inventory by the costs of goods sold

c. multiplying average inventory by 1.5

d. adding beginning and ending inventory and then dividing by two

31. Which of the following is not an example of a lean inventory approach?

b. collaborative planning, forecasting, and replenishment

e. all of the above are lean inventory approaches

32. Which of the following statements about the lean approach and JIT is false?

a. JIT tends to focus on product movement from manufacturer to retailer

b. organizations should give careful consideration before adopting a lean philosophy

c. the lean approach views inventory as waste

d. trucking is an important mode of transportation in JIT systems

33. Which of the following statements about service parts logistics is false?

d. the worldwide economic slowdown of 2008 and 2009 caused a decreased emphasis on service parts logistics

a. customer expectations for service parts logistics continues to increase

b. some organizations outsource their service parts logistics to companies that specialize in this area

c. service parts logistics creates a variety of potential challenges for logisticians

CHAPTER 8: INVENTORY MANAGEMENT

Authored by Trang Thanh

Specialty

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

1. ____ refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns.

a. logistics

b. supply chain management

c. inventory

d. production

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

2. Holding high levels of inventory result in inventory carrying costs and stockout costs.

a. high; high

b. high; low

c. low; high

d. low; low

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

3. ____ stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle.

a. base

b. speculative

c. pipeline

d. safety

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

4. ____ stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time.

a. base

b. pipeline

c. speculative

d. buffer

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

5. ____ stock refers to inventory that is en route between various nodes in a logistics system.

a. base

b. safety

c. speculative

d. cycle

e. none of the above

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

6. ____ stock refers to inventory that is held for several reasons, to include seasonal demand, projected price increases, and potential shortages of product.

a. base

b. safety

c. pipeline

d. speculative

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

7. ____ stock is carried to stimulate demand.

a. base

b. psychic

c. speculative

d. attractive

e. none of the above

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CHAPTER 8: INVENTORY MANAGEMENT

1. ____ refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns.

2. Holding high levels of inventory result in inventory carrying costs and stockout costs.

3. ____ stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle.

4. ____ stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time.

5. ____ stock refers to inventory that is en route between various nodes in a logistics system.

6. ____ stock refers to inventory that is held for several reasons, to include seasonal demand, projected price increases, and potential shortages of product.

7. ____ stock is carried to stimulate demand.

8. Inventory costs in the United States in the twenty-first century represent approximately ____ of total logistics costs.

9. All of the following statements are true, except:

10. Inventory carrying costs in the United States in the twenty-first century have ranged between and percent.

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CHAPTER 8: INVENTORY MANAGEMENT

1. ____ refers to stocks of goods and materials that are maintained for many purposes, the most common being to satisfy normal demand patterns.

2. Holding high levels of inventory result in ____ inventory carrying costs and ____ stockout costs.

3. ____ stock refers to inventory that is needed to satisfy normal demand during the course of an order cycle.

4. ____ stock refers to inventory that is held in addition to cycle stock to guard against uncertainty in demand and/or lead time.

5. ____ stock refers to inventory that is en route between various nodes in a logistics system.

6. ____ stock refers to inventory that is held for several reasons, to include seasonal demand, projected price increases, and potential shortages of product.

7. ____ stock is carried to stimulate demand.

8. Inventory costs in the United States in the twenty-first century represent approximately ____ of total logistics costs.

9. All of the following statements are true, except:

10. Inventory carrying costs in the United States in the twenty-first century have ranged between ____ and ____ percent.

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2. Holding high levels of inventory result in inventory carrying costs and stockout costs.

10. Inventory carrying costs in the United States in the twenty-first century have ranged between and percent.