SCM 502 EVALUATION TEST QUESTIONS AND
ANSWERS SET A+
✔✔What is inventory turnover? - ✔✔the frequency of inventory replacement
✔✔Inventory Turnover Ratio - ✔✔COGS/Average Inventory ( @ cost/ selling price / in
units)
✔✔Suppose a firm has an annual COGS of $500 million and its Average Inventory level
during the year is $80 million at cost. What is the inventory turnover? - ✔✔$
=6.25 turns
in days --> 365/ 6.25 = 58.4 days
✔✔Days of supply formula - ✔✔Current inventory/ expected rate of daily demand
✔✔Two independent demand inventory systems types: - ✔✔1. continuous review model
2. periodic review model
✔✔Continuous Review Model - ✔✔inventory is constantly monitored to decide when a
replenishment order needs to be placed
decrease to a level known as the reorder point
✔✔total acquisition cost (TAC) and the formula? - ✔✔the sum of all relevant inventory
costs incurred each year
# of orders placed a year = annual demand / order quantity
✔✔Economic Order Quantity (EOQ) - ✔✔the optimal order size to minimize the sum of
ordering, carrying, and stockout costs
, ✔✔ISO 14000 series - ✔✔extends the concept, identifying standards for environmental
performance
✔✔Which of the following programs/initiatives strives to improve the lives of
suppliers and their families?
ISO 14000
LEED
FairTrade
Responsible Care - ✔✔FairTrade
✔✔Periodic Review System - ✔✔a system in which an item's inventory position is
reviewed periodically rather than continuously. Fixed Order interval!
✔✔Give an example of a single period inventory model? - ✔✔Newsvendor problem
ordering papers , halloween stores ordering costumes, fashion, restaurants.
✔✔What is the square root rule? - ✔✔The impact of the change in the number of
stocking locations on total system safety stock.
✔✔ABC analysis is based upon the principle that - ✔✔there are usually a few critical
items, and many items that are less critical
✔✔Common audit approach for inventory? - ✔✔Cycle Counting
Each item in inventory is physically counted on a routine schedule
✔✔What is the bullwhip effect? - ✔✔small changes in customer demand ripple through
to create larger and larger changes as orders move through the supply chain
...of great concern!
✔✔Supplier Managed Inventory (SMI) - ✔✔Inventory that is owned and controlled by
the supplier until the time that it is consumed. The supplier is responsible for all
reordering, stocking, and handling of the inventory.
✔✔CPFR (Collaborative Planning, Forecasting, and Replenishment) - ✔✔painter firms
periodically share information and forecasts in order to jointly develop their productions,
distributions, and replenishment plans.
✔✔What is blockchain? - ✔✔A digital ledger system for recording business transactions
and events
✔✔In a typical manufacturing organization, you can find inventory in at least one
ANSWERS SET A+
✔✔What is inventory turnover? - ✔✔the frequency of inventory replacement
✔✔Inventory Turnover Ratio - ✔✔COGS/Average Inventory ( @ cost/ selling price / in
units)
✔✔Suppose a firm has an annual COGS of $500 million and its Average Inventory level
during the year is $80 million at cost. What is the inventory turnover? - ✔✔$
=6.25 turns
in days --> 365/ 6.25 = 58.4 days
✔✔Days of supply formula - ✔✔Current inventory/ expected rate of daily demand
✔✔Two independent demand inventory systems types: - ✔✔1. continuous review model
2. periodic review model
✔✔Continuous Review Model - ✔✔inventory is constantly monitored to decide when a
replenishment order needs to be placed
decrease to a level known as the reorder point
✔✔total acquisition cost (TAC) and the formula? - ✔✔the sum of all relevant inventory
costs incurred each year
# of orders placed a year = annual demand / order quantity
✔✔Economic Order Quantity (EOQ) - ✔✔the optimal order size to minimize the sum of
ordering, carrying, and stockout costs
, ✔✔ISO 14000 series - ✔✔extends the concept, identifying standards for environmental
performance
✔✔Which of the following programs/initiatives strives to improve the lives of
suppliers and their families?
ISO 14000
LEED
FairTrade
Responsible Care - ✔✔FairTrade
✔✔Periodic Review System - ✔✔a system in which an item's inventory position is
reviewed periodically rather than continuously. Fixed Order interval!
✔✔Give an example of a single period inventory model? - ✔✔Newsvendor problem
ordering papers , halloween stores ordering costumes, fashion, restaurants.
✔✔What is the square root rule? - ✔✔The impact of the change in the number of
stocking locations on total system safety stock.
✔✔ABC analysis is based upon the principle that - ✔✔there are usually a few critical
items, and many items that are less critical
✔✔Common audit approach for inventory? - ✔✔Cycle Counting
Each item in inventory is physically counted on a routine schedule
✔✔What is the bullwhip effect? - ✔✔small changes in customer demand ripple through
to create larger and larger changes as orders move through the supply chain
...of great concern!
✔✔Supplier Managed Inventory (SMI) - ✔✔Inventory that is owned and controlled by
the supplier until the time that it is consumed. The supplier is responsible for all
reordering, stocking, and handling of the inventory.
✔✔CPFR (Collaborative Planning, Forecasting, and Replenishment) - ✔✔painter firms
periodically share information and forecasts in order to jointly develop their productions,
distributions, and replenishment plans.
✔✔What is blockchain? - ✔✔A digital ledger system for recording business transactions
and events
✔✔In a typical manufacturing organization, you can find inventory in at least one
