Inventory/Purchasing Questions

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Inventory/PurchasingQuestions

• Top Secret

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1.Which of the following is NOT one of
the five purposes that inventory serves?

1. Prevents economies of scale
2. Balances supply and demand
3. Enables specialization in manufacturing
4. Provides protection from uncertainties in demand
   and order cycle time
5. Acts as a buffer between critical interfaces
   within the supply chain

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1.Which of the following is NOT one of the five
purposes that inventory serves?

• Prevents economies of scale
• Balances supply and demand
• Enables specialization in manufacturing
• Provides protection from uncertainties in demand
  and order cycle time
• Acts as a buffer between critical interfaces
  within the supply chain

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2.Variability in demand increases safety stock.

1. True
2. False

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2.Variability in demand increases safety stock.

• True
• False

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3.Speculative stock is held in inventory because
of

1. Demand uncertainty
2. Forecasted price increases
3. Variability in lead times
4. Manufacturing requirements

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3.Speculative stock is held in inventory because
of

1. Demand uncertainty
2. Forecasted price increases
3. Variability in lead times
4. Manufacturing requirements

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4.Seasonal stock is used to prevent stockouts.

1. True
2. False

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4.Seasonal stock is used to prevent stockouts.

• True
• False

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5. Dead stock is

1. Ready to be shipped
2. Being held for extended periods of time
3. The same as safety stock
4. Stock that is obsolete

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5. Dead stock is

• Ready to be shipped
• Being held for extended periods of time
• The same as safety stock
• Stock that is obsolete

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6. The economic order quantity model (EOQ)

1. Eliminates inventory carrying costs
2. Maximizes output
3. Minimizes the total of inventory carrying costs
   and ordering costs
4. Has no effect on inventory carrying costs

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6. The economic order quantity model (EOQ)

• Eliminates inventory carrying costs
• Maximizes output
• Minimizes the total of inventory carrying costs
  and ordering costs
• Has no effect on inventory carrying costs

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7. Which of the following does NOT influence
forecasting accuracy?

1. Economic conditions
2. Competitive actions
3. Changes in government regulations
4. Market shifts
5. All of the above influence forecasting accuracy

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7. Which of the following does NOT influence
forecasting accuracy?

• Economic conditions
• Competitive actions
• Changes in government regulations
• Market shifts
• All of the above influence forecasting accuracy

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8. ______ represents the magnitude of a stockout.

1. Fill rate
2. EOQ
3. Replenishment cycle
4. Fixed Order Interval Model

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8. ______ represents the magnitude of a stockout.

• Fill rate
• EOQ
• Replenishment cycle
• Fixed Order Interval Model

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9. The Fixed Order Interval Model is used when
orders must be placed at fixed time intervals.

1. True
2. False

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9. The Fixed Order Interval Model is used when
orders must be placed at fixed time intervals.

• True
• False

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10. In a fixed-quantity arrangement, orders are
triggered by a time.

1. True
2. False

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10. In a fixed-quantity arrangement, orders are
triggered by a time.

• True
• False

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11. Which of the following is not a goal of
purchasing?

1. Keep inventory investment and loss at a minimum
2. Find or develop competent suppliers
3. Forecast accurate demand for materials purchased
4. Purchase items and services at lowest total cost

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11. Which of the following is not a goal of
purchasing?

• Keep inventory investment and loss at a minimum
• Find or develop competent suppliers
• Forecast accurate demand for materials purchased
• Purchase items and services at lowest total cost

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12. In the acquisition process, the most
important activity is thought to be

1. Purchasing the right quantity
2. Selecting the best supplier
3. Purchasing materials and services at lowest cost
4. Minimize lead time

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12. In the acquisition process, the most
important activity is thought to be

• Purchasing the right quantity
• Selecting the best supplier
• Purchasing materials and services at lowest cost
• Minimize lead time

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13. Which of the following is NOT a major product
category that is purchased by most companies?

1. Component parts
2. Raw materials
3. Operating supplies
4. Process equipment
5. All of the above are major categories purchased
   by most companies

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13. Which of the following is NOT a major product
category that is purchased by most companies?

• Component parts
• Raw materials
• Operating supplies
• Process equipment
• All of the above are major categories purchased
  by most companies

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14. Supplier certification is thought to be
better than inspection programs.

1. True
2. False

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14. Supplier certification is thought to be
better than inspection programs.

• True
• False

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15. Just in time is

1. A specific method of managing inventory
2. More of a philosophy of doing business
3. Uses detailed specifications
4. Promotes safety stock

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15. Just in time is

• A specific method of managing inventory
• More of a philosophy of doing business
• Uses detailed specifications
• Promotes safety stock

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16. Which of the following is not an important
part of JIT?

1. Safety Stock
2. Buyer/Supplier Communication
3. Purchaser/Supplier relationship
4. All of the above are important parts of JIT

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16. Which of the following is not an important
part of JIT?

• Safety Stock
• Buyer/Supplier Communication
• Purchaser/Supplier relationship
• All of the above are important parts of JIT

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17. Which of the following is not an issue
related to supplier selection?

1. Quality control methods
2. Supplier proximity
3. Manufacturing flexibility
4. Lead time reliability
5. All of the above are issues related to supplier
   selection

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17. Which of the following is not an issue
related to supplier selection?

• Quality control methods
• Supplier proximity
• Manufacturing flexibility
• Lead time reliability
• All of the above are issues related to supplier
  selection

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18. JIT manufacturers and their suppliers
generally have short term contracts

1. True
2. False

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18. JIT manufacturers and their suppliers
generally have short term contracts

• True
• False

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19. Which of the following is not a benefit of
JIT?

1. Lower inventory carrying costs
2. Production levels are relatively level
3. Demand for materials is more predictable
4. Increased sales

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19. Which of the following is not a benefit of
JIT?

• Lower inventory carrying costs
• Production levels are relatively level
• Demand for materials is more predictable
• Increased sales

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20. An In-Plant Representative

1. Is a supplier in the buying companys office
2. Often replaces a purchaser, planner, and a
   salesperson
3. Is associated with JIT II
4. All of the above

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20. An In-Plant Representative

• Is a supplier in the buying companys office
• Often replaces a purchaser, planner, and a
  salesperson
• Is associated with JIT II
• All of the above

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21. Typical Criteria to use in identifying
critical purchases are

1. Percentage of product cost
2. Percentage of total purchase expenditure
3. Use on high-margin end items
4. A and C
5. All of the above

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21. Typical Criteria to use in identifying
critical purchases are

• Percentage of product cost
• Percentage of total purchase expenditure
• Use on high-margin end items
• A and C
• All of the above

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22. All of the following are ways to reduce
inventory levels except

1. Lead time analysis
2. Measurement of fill rate by SKU
3. Eliminating high turnover
4. Analysis of customer demand characteristics
5. All of the above

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22. All of the following are ways to reduce
inventory levels except

• Lead time analysis
• Measurement of fill rate by SKU
• Eliminating high turnover
• Analysis of customer demand characteristics
• All of the above

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23. All of the following are symptoms of poor
inventory management except

1. Decreasing number of backorders
2. Increasing number of orders being canceled
3. Large quantities of obsolete items
4. Wide variance in inventory turnover
5. All of the above

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23. All of the following are symptoms of poor
inventory management except

1. Decreasing number of backorders
2. Increasing number of orders being canceled
3. Large quantities of obsolete items
4. Wide variance in inventory turnover
5. All of the above

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24. The idea behind ABC analysis is that 20 of a
firms customers or products accounts for 80 of
the sales

1. True
2. False

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24. The idea behind ABC analysis is that 20 of a
firms customers or products accounts for 80 of
the sales

• True
• False

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25. Many companies use ERP systems to improve

1. Materials management
2. Plant management
3. Quality management
4. Production planning and control
5. All of the above

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25. Many companies use ERP systems to improve

• Materials management
• Plant management
• Quality management
• Production planning and control
• All of the above

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26. A primary goal of inventory management is to
achieve an optimum balance between inventory
carrying costs and customer service.

1. True
2. False

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26. A primary goal of inventory management is to
achieve an optimum balance between inventory
carrying costs and customer service.

• True
• False

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27. Cost reduction and cost avoidance programs
include all of the following except

• Supplier development
• Standardization
• Make or Buy analysis
• Increase in inventory

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27. Cost reduction and cost avoidance programs
include all of the following except

• Supplier development
• Standardization
• Make or Buy analysis
• Increase in inventory

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28. Which of the following is not a performance
measure?

1. Price effectiveness
2. Value analysis
3. Material flow control
4. Cost savings
5. All of the above

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28. Which of the following is not a performance
measure?

• Price effectiveness
• Value analysis
• Material flow control
• Cost savings
• All of the above

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29. System contracts are a means of reducing
materials related costs

1. True
2. False

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29. System contracts are a means of reducing
materials related costs

• True
• False

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30. All of the following are objectives of system
contracts and stockless purchasing except

1. Lower inventory levels
2. Increase in number of suppliers
3. Reduction in administrative cost and paperwork
4. Timely delivery of material directly to user
5. All of the above

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30. All of the following are objectives of
system contracts and stockless purchasing except

• Lower inventory levels
• Increase in number of suppliers
• Reduction in administrative cost and paperwork
• Timely delivery of material directly to user
• All of the above

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31. ______ is a physical resource that a firm
holds in stock with the intent of selling it or
transforming it into a more valuable state.

1. Raw materials
2. Work-in-process
3. Inventory
4. Finished goods

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31. ______ is a physical resource that a firm
holds in stock with the intent of selling it or
transforming it into a more valuable state.

• Raw materials
• Work-in-process
• Inventory
• Finished goods

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32. Inventory impacts all of the following except

1. Customer Satisfaction
2. Logistics activity performance
3. Company performance
4. Forecasting accuracy
5. All of the above are impacted by inventory

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32. Inventory impacts all of the following except

• Customer Satisfaction
• Logistics activity performance
• Company performance
• Forecasting accuracy
• All of the above are impacted by inventory

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33. Which of the following is not an objective of
inventory?

1. Fulfill corporate policies and goals
2. Create customer demand
3. Minimize total logistics activities
4. Promote corporate profitability
5. All of the above are objectives of inventory

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33. Which of the following is not an objective of
inventory?

• Fulfill corporate policies and goals
• Create customer demand
• Minimize total logistics activities
• Promote corporate profitability
• All of the above are objectives of inventory

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34. The three types of inventory are
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34. The three types of inventory are

• Raw materials
• Work-in-process
• Finished goods

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35. Which of the following is not a key decision
of inventory?

1. How much to order
2. When to order
3. Where to hold inventory
4. When to substitute transportation for inventory
5. All of the above are key decisions of inventory

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35. Which of the following is not a key decision
of inventory?

• How much to order
• When to order
• Where to hold inventory
• When to substitute transportation for inventory
• All of the above are key decisions of inventory

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36. Which of the following is NOT an aspect of
inventory that must be managed?

1. Holding costs
2. Number of products
3. Value analysis
4. Lead time
5. All of the above are aspects of inventory that
   must be managed

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36. Which of the following is NOT an aspect of
inventory that must be managed?

• Holding costs
• Number of products
• Value analysis
• Lead time
• All of the above are aspects of inventory that
  must be managed

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37. All of the following are internal
measurements of inventory except

1. Inventory turn
2. Selling days on hand
3. Backorder level
4. Inventory sales to ratio
5. All of the above are internal measurements

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37. All of the following are internal
measurements of inventory except

• Inventory turn
• Selling days on hand
• Backorder level
• Inventory sales to ratio
• All of the above are internal measurements

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38. Which of the following is NOT an external
measurement of inventory?

1. Customer service level
2. Customer delivery quantity
3. Customer delivery cycle time
4. ABC analysis

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38. Which of the following is NOT an external
measurement of inventory?

• Customer service level
• Customer delivery quantity
• Customer delivery cycle time
• ABC analysis

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39. All of the following are symptoms of poor
inventory management except

1. Decreasing numbers in backorders
2. Higher customer turnover rate
3. Periodic lack of storage space
4. Increasing number of canceled orders
5. All of the above are symptoms of poor inventory
   management

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39. All of the following are symptoms of poor
inventory management except

• Decreasing numbers in backorders
• Higher customer turnover rate
• Periodic lack of storage space
• Increasing number of canceled orders
• All of the above are symptoms of poor inventory
  management

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40. Which of the following is NOT a strategy to
manage inventory?

1. ABC analysis
2. Real-time visibility
3. Inventory models
4. Centralized decision making
5. All of the above are strategies to manage
   inventory

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40. Which of the following is NOT a strategy to
manage inventory?

• ABC analysis
• Real-time visibility
• Inventory models
• Centralized decision making
• All of the above are strategies to manage
  inventory