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FINMAN > INVENTORY MANAGEMENT MCQ > Flashcards

INVENTORY MANAGEMENT MCQ Flashcards

1
Q

Which of the following is not an inventory?

A.Machines

B.Raw material

C.Finished products

DConsumable tools

A

A. Machines

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2
Q

The cost of insurance and taxes are included in

A. Cost of ordering

B.Set up cost

C.Inventory carrying cost

D.Cost of shortages

A

C. Inventory Carrying Cost

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3
Q

The time period between placing an order its receipt in stock is known as

A.Lead time

B.Carrying time

C.Shortage time

D.Over time

A

A. Lead time

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4
Q

If demand in units is 18000, relevant ordering cost for each year is $150 and an order quantity is 1500 then annual relevant ordering cost would be

A.$200

B.$190

C.$160

D.$180

A

D. 180

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5
Q

Profit forgone by capital investment in inventory rather than investment of capital to somewhere else is classified as

A.relevant purchase order costs

B.relevant inventory carrying costs

C.irrelevant inventory carrying costs

D.relevant opportunity cost of capital

A

D.relevant opportunity cost of capital

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6
Q

Costing system which omits some of journal entries in accounting system is known as

A.ain-time costing

B.trigger costing

C.back flush costing

D.lead time costing

A

C.back flush costing

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7
Q

If required rate of return is 12% and per unit cost of units purchased is $35 then relevant opportunity cost of capital will be

A.$6.20

B.$7.20

C.$4.20

D.$5.20

A

C.$4.20

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8
Q

If purchase order lead time is 35 minutes and number of units sold per time is 400 units then reorder point will be

A.14000 units

B.14500 units

C.15000 units

D.15500 units

A

A.14000 units

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9
Q

If demand of one year is 25000 units, relevant ordering cost for each purchase order is $210 and carrying cost of one unit of stock is $25 then economic order quantity is

A.678 packages

B.648 packages

C.658 packages

D.668 packages

A

B.648 packages

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10
Q

Which of the following is true for Inventory control?

AEconomic order quantity has minimum total cost per order

BInventory carrying costs increases with quantity per order

COrdering cost decreases with lo size

DAll of the above

A

D. All of the above

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11
Q

The time period between placing an order its receipt in stock is known as

ALead time

BCarrying time

CShortage time

DOver time

A

A. lead time

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12
Q

Activities related to coordinating, controlling and planning activities of flow of inventory are classified as

Adecisional management

Bthroughput management

Cinventory management

Dmanufacturing management

A

C. Inventory Management

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13
Q

Cost of product failure, error prevention and appraisals are classified as

Astocking costs

Bstock-out costs

Ccosts of quality

DNone of the above

A

C. Costs of quality

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14
Q

An example of purchasing costs include

Aincoming freight

Bstorage costs

Cinsurance

Dspoilage

A

C. Insurance

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15
Q

If an average inventory is 2000 units and annual relevant carrying cost of each unit is $5 then annual relevant carrying cost will be

A$5,000

B$4,500

C$5,500

D$6,000

A

A 5,000

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16
Q

Method of costing that supports creation of value for customer by accounting whole value stream rather than individual departments or products is classified as

Aeconomic accounting

Bback-flush accounting

Clean accounting

Dlead accounting

A

C. Lean accounting

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17
Q

Stage in manufacturing cycle at which journal entries are made in system of accountancy is known as

Achaining point

Brecording point

Clead point

Dtrigger point

A

D trigger point

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18
Q

Decision model to calculate optimal quantity of inventory to be ordered is called

Aefficient order quantity

Beconomic order quantity

Crational order quantity

Doptimized order quantity

A

Beconomic order quantity

19
Q

If relevant incremental costs are $5000 and relevant opportunity cost of invested capital is $2500 then relevant inventory carrying costs would be

A$7,500

B$7,000

C$6,500

D$6,000

A

A$7,500

20
Q

An example of shrinkage costs includes

Aincoming freight

Bstorage costs

Cinsurance

Dclerical errors

A

D clerical errors

21
Q

If relevant opportunity cost of capital is $2950 and relevant carrying cost of inventory is $6700 then relevant incremental cost will be

A$9,650

B$2,350

C$3,750

DAll of the above

A

C $3,750

22
Q

The order cost per order of an inventory is Rs. 400 with an annual carrying cost of Rs. 10 per unit. The Economic Order Quantity (EOQ) for an annual demand of 2000 units is

A400

B440

C480

D500

A

A 400

23
Q

Which of the following is true for Inventory control?

AEconomic order quantity has minimum total cost per order

BInventory carrying costs increases with quantity per order

COrdering cost decreases with lo size

DAll of the above

A

D all of the above

24
Q

‘Buffer stock’ is the level of stock

AHalf of the actual stock

BAt which the ordering process should start

CMinimum stock level below which actual stock should not fall

DMaximum stock in inventory

A

CMinimum stock level below which actual stock should not fall

25
Q

The following classes of costs are usually involved in inventory decisions except

ACost of ordering

BCarrying cost

CCost of shortages

DMachining cost

A

DMachining cost

26
Q

Which of the following relationships hold true for safety stock?

A The greater the risk of running out of stock, the smaller the safety stock

B the larger the opportunity cost of the funds invested in inventory, the larger the safety stock

C the greater the uncertainty associated with forecasted demand, the smaller the safety stock

D the higher the profit margin per unit, the higher the safety stock necessary

A

C the greater the uncertainty associated with forecasted demand, the smaller the safety stock

27
Q

Brea-even is not affected in the changes in ______

A sales price per unit

B variable cost per unit

C total fixed cost

D numbers of units sold

A

A sales price per unit

28
Q

Which of the following keeps a record of receipts, issues, and running balance of certain items of stock, especially of fitting items

A Stock items

B bin card

C quantity account

D value account

A

B bin card

29
Q

Which of the following is NOT a technique of inventory control

A ABC Analysis

B FSN Analysis

C GOLF Analysis

D FTMN Analysis

A

D FTMN Analysis

30
Q

ABC Inventory control focuses on those

A items not readily available

B items which consume less money

C items which have more demand

D Items which consume more money

A

D Items which consume more money

31
Q

Which of the following inventory costs represents the cost of loss of demand due to the shortage in supplies?

A stockout cost

B Unit cost

C Procurement cost

D carrying cost

A

A stockout cost

32
Q

Inventory control levels can be calculated in order to maintain inventories at the optimum level. The three critical control levels are:

A. Reorder level, minimum level and maximum level

B. Reorder level, Safety stock and Average inventory

C. Buffer stock, minimum level and maximum level

D. None

A

A. Reorder level, minimum level and maximum level

33
Q

A firm’s inventory turnover (IT) is 5 times on a cost of goods sold (COGS) of $800,000. If the IT is improved to 8 times while the COGS remains the same, a substantial amount of funds is released from or additionally invested in inventory. In fact,

A. $160,000 is released.

B. $100,000 is additionally invested.

C. $60,000 is additionally invested.

D. $60,000 is released

A

D. $60,000 is released

34
Q

If EOQ = 360 units, order costs are $5 per order, and carrying costs are $.20 per unit, what is the usage in units?

A. 129,600 units

B. 2,592 units

C. 25,920 units

D. 18,720 units

A

B. 2,592 units

35
Q

Costs of not carrying enough inventory include:

A. lost sales.

B. customer disappointment.

C. possible worker layoffs.

D. all of these.

A

D. all of these.

36
Q

Which of the following relationships hold true for safety stock?

A. the greater the risk of running out of stock, the smaller the safety of stock.

B. the larger the opportunity cost of the funds invested in inventory, the larger the safety stock.

C. the greater the uncertainty associated with forecasted demand, the smaller the safety stock.

D. the higher the profit margin per unit, the higher the safety stock necessary.

A

D. the higher the profit margin per unit, the higher the safety stock necessary.

37
Q

Receiving a required inventory item at the exact time needed.

A. ABC

B. JIT

C. FOB

D. PERT

A

B. JIT

38
Q

EOQ is the order quantity that over our planning horizon.

A. minimizes total ordering costs

B. minimizes total carrying costs

C. minimizes total inventory costs

D. the required safety stock

A

C. minimizes total inventory costs

39
Q

A B2B exchange is a Internet marketplace that matches supply and demand by real-time auction bidding.

A. buyer-to-business

B. business-to-business

C. business-to-buyer

D. buyer-to-buyer

A

B. business-to-business

40
Q

The minimum stock level is calculated as

A. Reorder level – (Normal consumption x Normal delivery time)

B. Reorder level + (Normal consumption x Normal delivery time)

C. (Reorder level + Normal consumption) x Normal delivery time

D. (Reorder level + Normal consumption) / Normal delivery time

A

A. Reorder level – (Normal consumption x Normal delivery time)

41
Q

Re-ordering level is calculated as

A. Maximum consumption rate x Maximum re-order period

B. Minimum consumption rate x Minimum re-order period

C. Maximum consumption rate x Minimum re-order period

D. Minimum consumption rate x Maximum re-order period

A

A. Maximum consumption rate x Maximum re-order period

42
Q

Average stock level can be calculated as

A. Minimum stock level + ½ of Re-order level

B. Maximum stock level + ½ of Re-order level

C. Minimum stock level + 1/3 of Re-order level

D. Maximum stock level + 1/3 of Re-order level

A

A. Minimum stock level + ½ of Re-order level

43
Q

The Economic Order Quantity (EOQ) is calculated as

A. (2D*S/h)^1/2

B. (DS*/h)^1/2

C. (D*S/2h)^1/2

D. (D*S/3h)^1/2

A

A. (2D*S/h)^1/2

Where, D=Annual demand (units), S=Cost per order, h=Annual carrying cost per unit

FINMAN (8 decks)

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