MGSC 492 Actual Questions and Correct Answers
Q1
What is the formula for calculating inventory turns?
Answer: Inventory turns = annual Cost of Goods Sold / average annual inventory.
Q2
If a company has an annual Cost of Goods Sold of $200,000 and an average annual inventory of
$50,000, what are the inventory turns?
Answer: The inventory turns would be 4, calculated as $200,000 / $50,000.
Q3
What inventory turns goal did management set in the example provided?
Answer: Management set the inventory turns goal to 8.
Q4
What are the three major components of inventory carrying cost?
Answer: Capital cost, storage cost, and risk cost.
Q5
What does capital cost refer to in inventory management?
Answer: Capital cost is the cost of using money tied up in inventory, including interest
if borrowed.
Q6
How is storage cost defined in the context of inventory?
Answer: Storage cost includes expenses for warehouse space, labor, cycle counting,
and equipment.
Q7
What is risk cost in inventory management?
Answer: Risk cost refers to potential losses from damage, theft, or obsolescence of
stored inventory.
, Q8
What is the annual inventory carrying cost percentage mentioned in the notes?
Answer: The inventory carrying cost is 30% annually.
Q9
How much would the carrying cost be for an average annual inventory of $50,000?
Answer: The carrying cost would be $15,000, calculated as $50,000 * 30%.
Q10
What is the days of supply for an inventory of 600 pieces with an average daily usage of 30?
Answer: The days of supply would be 20 days, calculated as .
Q11
What does ABC analysis indicate about inventory value?
Answer: ABC analysis shows that 20% of parts contribute to 80% of the inventory
value.
Q12
How is average inventory calculated when safety stock is included?
Answer: Average inventory = (Order quantity / 2) + Safety stock.
Q13
What percentage of gross domestic product does logistics represent in countries?
Answer: Logistics represents between 8% and 18% of the gross domestic product.
Q14
What is the total logistics concept?
Answer: It treats all elements of distribution and logistics as a single integrated
system.
Q1
What is the formula for calculating inventory turns?
Answer: Inventory turns = annual Cost of Goods Sold / average annual inventory.
Q2
If a company has an annual Cost of Goods Sold of $200,000 and an average annual inventory of
$50,000, what are the inventory turns?
Answer: The inventory turns would be 4, calculated as $200,000 / $50,000.
Q3
What inventory turns goal did management set in the example provided?
Answer: Management set the inventory turns goal to 8.
Q4
What are the three major components of inventory carrying cost?
Answer: Capital cost, storage cost, and risk cost.
Q5
What does capital cost refer to in inventory management?
Answer: Capital cost is the cost of using money tied up in inventory, including interest
if borrowed.
Q6
How is storage cost defined in the context of inventory?
Answer: Storage cost includes expenses for warehouse space, labor, cycle counting,
and equipment.
Q7
What is risk cost in inventory management?
Answer: Risk cost refers to potential losses from damage, theft, or obsolescence of
stored inventory.
, Q8
What is the annual inventory carrying cost percentage mentioned in the notes?
Answer: The inventory carrying cost is 30% annually.
Q9
How much would the carrying cost be for an average annual inventory of $50,000?
Answer: The carrying cost would be $15,000, calculated as $50,000 * 30%.
Q10
What is the days of supply for an inventory of 600 pieces with an average daily usage of 30?
Answer: The days of supply would be 20 days, calculated as .
Q11
What does ABC analysis indicate about inventory value?
Answer: ABC analysis shows that 20% of parts contribute to 80% of the inventory
value.
Q12
How is average inventory calculated when safety stock is included?
Answer: Average inventory = (Order quantity / 2) + Safety stock.
Q13
What percentage of gross domestic product does logistics represent in countries?
Answer: Logistics represents between 8% and 18% of the gross domestic product.
Q14
What is the total logistics concept?
Answer: It treats all elements of distribution and logistics as a single integrated
system.
