Inventory Flashcards
Back Order
An order placed for a product that is temporarily out of stock
Controlled Drugs
Any drug or therapeutic agent commonly understood to include narcotics, with a potential for abuse or addiction, which is held under strict government control, as delineated by the Comprehensive Drug Abuse Prevention & Control Act passed in 1970
COGS Cost of Goods Sold
A figure on the income statement that reflects the cost of products sold to consumers in the primary business activity of the practice
Damaged Goods
A good that is unfit or reduced in value for its intended use due to damage of some sort
EOQ Economic Order Quantity
The most economical quality of a product to order, factoring in both holding and operating costs
Efficiency Ratio for Accounts Payable to Sales
Ratios used to analyze how well a company uses its assets and liabilities internally
Expired Inventory
Inventory that has reached the end of its useful life, and cannot be sold as a finished good.
FIFO First In - First Out
The principle by which the oldest inventory items are recorded as sold first, but do not necessarily mean that the exact oldest physical object has been tracked and sold
Inventory Audit
An accounting procedure used to keep track of products and merchandise
Inventory Turnover
The relationship between expense of total items sold and the inventory value, computed by dividing the costs of the drugs and the dispensed items by the average inventory value
Mark-up
The amount added to the cost price of goods to cover overhead and profit
Online Pharmacy
a pharmacy that operates over the internet and sends the orders to customers through the mail or shipping companies
Overstock
A supply or quantity in excess of demand or requirements
Pharmacy
A store where medicinal drugs are dispensed and sold
QOH Quantity on Hand
Total number of inventory units currently in stock
Shrinkage
Inventory loss, usually unexplained or difficult to isolate
Special Orders
Patient medications or food that is ordered by a client, typically because it is not kept in stock on a regular basis
Unit of Measure - or - buy/sell ratio
This is assigned to all inventory items and must be defined before a product can be entered into inventory. Each product will have a stocking unit of measure, sales ordering unit of measure and a purchasing unit of measure.
Volume Purchasing
The act of purchasing goods in multiple units or in large quantities, usually with a financial incentive for doing so.
Procurement
The act of obtaining or buying goods
Supply and Demand
The relationship between the product availability and the need of the consumer to purchase it
Inventory
all goods owned and held for sale or use in the regular course of business
Replacement Costs
The price that will have to be paid to replace an existing inventory asset with the same or similar product
Inventory Control
Optimal inventory control ensures that frequently used items are always available and that return on investment for carrying and managing inventory is at the highest possible level
The process whereby the need to maintain sufficient inventory to meet operating demands is weighed against the monetary cost of carrying the inventory.
Merchandise Inventory
products purchased for resale to clients
Medical Supply Inventory - AKA Professional Inventory
items used in the course of providing veterinary medical and surgical services
Just In Time
Receiving a product just as needed vs storing the product
a. Inventory Manager
A global role that is responsible for all the tasks associated with the other Inventory Management roles
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
b. Inventory Researcher
This person evaluates and selects suppliers and products
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
e. Inventory Purchaser
This person identifies product needs and places orders using the suppliers chosen by the Inventory Researcher
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
c. Department Lead
This role is responsible for identifying products needs within their specific department
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
d. Inventory Receiver
This person is trained to unpack, account for, and stock the shipments
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
f. Inventory Documenter and Tracker
This role documents the receipt of inventory, transfers of inventory, hospital use, shrinkage, etc in order to maintain accurate and up to date data in the practice management software
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
g. Inventory Counter
This person can be any employee who performs physical inventory counts
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
f. Bookkeeper
This person in responsible for the chart of accounts, entering costs of goods data, purchasing budgets, and reports
a. Inventory Manager
b. Inventory Researcher
c. Department Lead
d. Inventory Receiver
e. Inventory Purchaser
f. Inventory Documenter and Tracker
g. Inventory Counter
f. Bookkeeper
d. Unit/Product Cost
The total amount paid to vendor divided by the number of units ordered
a. Ordering Costs
b. Replacement Cost
c. Holding Costs
d. Unit/Product Cost
b. Replacement Cost
the price that will be paid to replace the inventory with the same or similar item
a. Ordering Costs
b. Replacement Cost
c. Holding Costs
d. Unit/Product Cost
a. Ordering Costs
Labor related expenses such as employee compensation, including benefits and taxes paid to employees to perform the various duties associated with ordering, receiving, unpacking, manage payment and records
a. Ordering Costs
b. Replacement Cost
c. Holding Costs
d. Unit/Product Cost
c. Holding Costs
The costs invested in keeping the inventory on premises while waiting to use or sell. These costs include personal property tax, insurance, pharmacy licensing/DEA fees, utilities, loss due to expiration/waste/spoilage, OSHA regulations regarding safe handling of inventory, and routine product maintenance
a. Ordering Costs
b. Replacement Cost
c. Holding Costs
d. Unit/Product Cost
True
True / False
Holding costs usually range from 8-15% of the true total cost. Combined ordering and holding costs account for approx 25-35% the total true cost
False
If DVMs in the practice are paid on production and inventory is included in their commission, then allocation of a portion of their pay is considered an actual cost of inventory.
True / False
If DVMs in the practice are paid on production and inventory is included in their commission, then allocation of a portion of their pay would not be considered an actual cost of inventory.
Control Functions
preparing and distributing written policies and procedures, creating and maintaining security and safety protocol, and regular monitoring of the system via counts and accountability. Needs to be flexible to change
Perpetual Inventory System
A system that can provide an accurate idea of inventory quantities at any time. When items are received they are immediately added to the inventory records and when items are used or sold they are removed from the inventory records.
Periodic Inventory System
a system that uses data from manual product counts at the end of every financial period
Internal Controls
All measures, systems, and protocols used to prevent errors, waste and fraud with inventory.
Physical Inventory Count
a process of manually counting quantities on hand
c. Inventory
In Vet Med, What costs make up the second largest expense category, second only to staffing costs.
a. Fixed Costs
b. Variable Costs
c. Inventory
d. New Equipment
c. Print your code or product lists and review/delete items
e. Reprint the list
a. Create a list of unconsolidated products
b. Count Inventory
d. Begin to enter / receive inventory
Below are the five steps to get your inventory under control. What order should they go?
a. Create a list of unconsolidated products
b. Count Inventory
c. Print your code or product lists and review / delete items
d. Begin to enter/receive inventory
e. Reprint the lists
c. 1-4%
Any variance in inventory is an indication of a weakness or problem although a ____% variance on high turn items can be acceptable.
a. 1-2%
b. 2-4%
c. 1-4%
d. 3-6%
Average Daily Use x Lead time = reorder point
What is the formula for calculating reorder point?
Reorder Point
The number at which an inventory item can be reduced down to before it needs to be reordered.
Reorder Quantity
This is the amount of product to order once the reorder point has been reached
Average Daily Use x Turnover Goal (in days) = reorder quantity
What is the formula for calculating the reorder quantity of an inventory item?
Zoning and Central Supply
What are two types of inventory organization techniques
Selective Inventory Control
This is a Profit-based management system that prioritizes inventory based on value and importance
a. 20%
according to Pareto’s 80/20 rule
the Selective Inventory Control theory suggests investing the most time in managing those products in the ___%
a. 20%
b. 50%
c. 70%
d. 80%
Beginning of year inventory value + End of year inventory value divided by 2 = Avg Inv.
COGS for year / Avg Inv. = Inventory Turnover Ratio
What is the calculation for Inventory Turns?
c. 40%
In vet med, a ___% mark-up on cost will likely result in break even for the practice once all costs of operations are considered
a. 20%
b. 33%
c. 40%
d. 55%
Margin
This pricing strategy pre determines the amount of profit desired, and adds that to the acquisition cost. Can be a useful strategy where there are large differences in resulting price based on the size of the patient.
Break Even Analysis
an analysis that is used to determine when your business will be able to cover all of its expenses and begin to make a profit
Break Even Point
The amount of revenue that covers all fixed and variable costs without generating either profit or loss
b. Break even analysis
The process used to determine how much money or service must be recovered or performed to cover the cost of purchasing equipment or adding a service to the practice.
a. Break even point
b. Break even analysis
c. Margin
d. Mark-up
a. Break even Point
The point at which total revenues and total expenses are equal, where there is no net loss or gain on a piece of equipment or supply.
a. Break even point
b. Break even analysis
c. Margin
d. Mark-up
Fixed Costs + Variable Costs + Profit = Break Even Sales Price Equation
What is the formula for calculating a Break Even Sales Price on a piece of equipment
b. Prioritizing inventory time investment.
Since 20 % of our products bring in 80% of our produce revenue, we should concentrate the lion’s share of our efforts on that top 20%.
According to Practice Made Perfect; applying Pareto’s 80/20 rule to inventory helps in;
a. Making organizational decisions about inventory.
b. Prioritizing inventory time investment.
c. Creating a marketing strategy regarding inventory.
d. Making budget decisions regarding inventory.
a. Monthly
Ideally, the top 20% of inventory items should be ordered;
a. Monthly
b. Weekly
c. When stock is down to 1-3 units.
d. When stock is no lower than 10 – 12 units.
a. The Inventory Receiver
c. The Inventory Documenter and Tracker
To maintain tight internal controls the role of Inventory Purchaser should always be a separate individual from (multiple choice)
a. The Inventory Receiver
b. The Inventory Counter
c. The Inventory Documenter and Tracker
d. The Inventory Researcher
all of the above
The Tax Act of 2003 provided what increased benefits to small business owners (Multiple Choice);
a. Significantly increased the amount of eligible property that can be written off in the first year.
b. Gave an additional deduction of 50% of the remaining balance of the equipment purchased that is above the $139,000.
c. The remainder of the purchases can also be depreciated on a straight line depreciation schedule.
c. 1%
Practices should plan to reinvest around ___% of gross revenue for replacing or acquiring equipment annually.
a. 5%
b. 3%
c. 1%
c. Yes, if it is in useable condition.
Is the digital radiography unit in your practice considered Capital Inventory?
a. If it is valued at $1,500 or higher.
b. If it is valued at $15,000 or higher.
c. Yes, if it is in useable condition.
All of the Above
Which details below are considered a benefit of using logs in veterinary medicine? (Multiple Choice)
a. To comply with legal requirements such as controlled substances log.
b. Provide evidence in the event of a malpractice claim.
c. Convenient for quick data analysis and auditing.
a. The AVMA Principles of Veterinary Medical Ethics.
The state Veterinary Practice Act defines minimum medical record documentation for each state. What other entity defines minimal requirements of veterinary medical records?
a. The AVMA Principles of Veterinary Medical Ethics.
b. Both the DEA and The AVMA Principles of Veterinary Medical Ethics
c. The AVMA Principles of Veterinary Medical Ethics and AAHA (American Animal Hospital Association)
a. Problem Oriented Medical Record (POMR)
The most common medical record format is;
a. Problem Oriented Medical Record (POMR)
b. Source Oriented Medical Records (SOMR)
True
True / False
Software and Hardware purchases will show greater return on investment than any other capital expense in veterinary medicine due to increased efficiency in every department.
True
True / False
Hardware and software of both examples of Information Systems.
c. ½ day
Ideally no less than _____ of on-site training should accompany any major software conversion.
a. 2 days
b. 1 day
c. ½ day
b. Development.
Which of the four phases of Strategic Planning is focused on how the practice will get from point A (now) to point B (the future)?
a. Formulation.
b. Development.
c. Implementation.
d. Evaluation.
b. Organizational Design.
Leadership Fatigue can be experienced by both owners and managers and usually results from a lack of communication, lack of delineation of job duties, and feeling that they are constantly haggling with the team to carry out policies and procedures. Which element of the strategic plan addresses this dynamic?
a. Organizational Development.
b. Organizational Design.
c. Organizational Learning.
c. 12 – 36 months.
How long can it take to prepare a team member for a leadership position?
a. 6 – 12 months.
b. 12 – 24 months.
c. 12 – 36 months.
d. 24 – 36 months.
b. Operating demands
Inventory Control is defined as the process whereby the need to maintain sufficient inventory to meet _________ is weighed against the monetary cost of carrying the inventory.
a. Inventory Turnover
b. Operating demands
c. Client demand
d. Supply and Demand
b. 25-35%
Combined ordering and holding costs account for approximately what percent of total true cos
a. 15-25%
b. 25-35%
c. 30-40%
all in order
The ABC Inventory Analysis contains multiple steps and can be somewhat complex – if you had to define the ABC Analysis in 5 steps, what would those steps be?
1. Create spreadsheet and calculate Annual Usage Volume.
2. Then calculate cumulative Annual Usage Volume.
3. Then calculate the Cumulative Percentage of Annual Usage Volume.
4. Then calculate the Annual Usage Distribution.
5. Group items into classes A, B, C.
c. Average Inventory on Hand (AI)
The sum of the beginning inventory (BI) and the ending inventory (EI) divided by 2 is the calculation to determine what metric (BI + EI) / 2?
a. Min/max inventory reorder points
b. Monthly inventory to order
c. Average Inventory on Hand
a. Higher
The _______the inventory turnover ratio, the tighter the inventory control.
a. Higher
b. Lower
Economic Order Quantity (EOQ)
A mathematical formula, that recognizes three specific costs including unit cost, ordering cost, and holding cost, allows calculation of ideal inventory ordering
Margin Pricing method
Regarding Mark-up and Margin pricing structures, which is a useful strategy to use where there are large differences in the end resulting price based on the size of the patient?
Drugs used to treat chronic conditions
Which category of drugs is likely to have a higher mark-up; competitive drugs or drugs used to treat chronic conditions?
False. Clients do not have a complete understanding or appreciation of the costs associated with dispensing medications.
True / False
Itemizing the various fees potentially associated with dispensing medication (labeling, dispensing, minimum, etc.) on the client invoice helps improve perceived value of the medication.
10
Calculate the inventory variance using the following data;
Beginning quantity = 250
Amount ordered and received = 1000
Amount sold = 942
Physical count of quantity on hand = 298
Variance = ________________.
Zoning and Central Supply
What are the two main inventory organizational techniques?
Yep - all
What are the four steps to Inventory Budgeting?
1 – Project Revenue
2 – Project COG Expenses
3 – Project COG Subsection Expenses
4 – Share the Budget and Communicate Expectations.
d. When ordering regularly used products
EOQ is a mathematical model that finds the optimum order quantity by determining the point at which inventory ordering and holding costs are minimized
In which situation would it be beneficial to apply the economic order quantity EOG formula?
a. When ordering new equipment
b. When ordering new products for the first time
c. When ordering manufacturer or seasonal specials
d. When ordering regularly used products
All
Maximizing inventory turnover is a key strategy in creating an efficient and profitable inventory system. Name 4 ways to increase your inventory turnover
1. Product Consolidation
2. Order quantities that make sense
3. Measure and increase compliance
4. Doctor and staff product education
