Reference no: EM132247837
1. Transportation cost is an example of
A. item cost.
B. ordering cost.
C. carrying cost.
D. storage cost.
2. Safety stock inventory is
A. equivalent to the economic order quantity.
B. providing for inventory that is in transit from one location to another.
C. maintained to absorb uncertainty in, for example, delivery lead time from suppliers.
D. all of the above.
3. At the economic order quantity,
A. the annual ordering cost for an item is greater than the annual holding cost.
B. the annual ordering cost and annual holding cost for an item are equal.
C. the annual ordering cost for an item is less than the annual holding cost.
D. none of these answers are true.
4. Primary reasons to hold inventory include all of the following EXCEPT
A. to achieve economies of scale.
B. to protect against anticipated changes in demand or supply.
C. to decrease inventory turnover ratio.
D. to provide for transit.
5. Correctly complete the following statements. Independent demand and dependent demand differ in that
A. independent demand is certain and is determined from a planned production schedule for finished goods, while dependent demand is uncertain and therefore needs to be forecast.
B. inventory levels of independent demand items may be managed with a requirements philosophy, while inventory levels of dependent demand items may be managed by a replenishment philosophy.
C. finished goods typically experience independent demand, while components of a product experience dependent demand.
D. service firms experience dependent demand, while manufacturing firms experience independent demand.
6. Which of the following statements about ABC inventory classification schemes is FALSE?
A. “A” items typically represent the smallest group in terms of the number of items.
B. As little as 10–20% of the items may account for 60–80% of the annual dollar use.
C. “A” items often justify perpetual inventory recordkeeping.
D. ABC systems typically have more than three classes.