GMS 401 FINAL EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026

GMS 401 FINAL EXAM QUESTIONS WITH CORRECT ANSWERS LATEST UPDATE 2026 Which of the following statements regarding A is false? a. The company was opened by Jeff Bezos in 1995. b. The company was founded as, and still is, a "virtual retailer" with no inventory. c. The company is now a world-class leader in warehouse management and automation. d. The company uses both United Parcel Service and the U.S. Postal Service as shippers. e. Amazon obtains its competitive advantage through inventory management. - Answers b. The company was founded as, and still is, a "virtual retailer" with no inventory. Which of the following is a function of inventory? a. to decouple or separate parts of the production process b. to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers c. to take advantage of quantity discounts d. to hedge against inflation e. All of the above are functions of inventory. - Answers e. All of the above are functions of inventory. Which of the following would not generally be a motive for a firm to hold inventories? a. to decouple or separate parts of the production process b. to provide a stock of goods that will provide a selection for customers c. to take advantage of quantity discounts d. to minimize holding costs e. All of the above are functions of inventory. - Answers d. to minimize holding costs Which of the following is not one of the four main types of inventory? a. raw material inventory b. work-in-process inventory c. maintenance/repair/operating supply inventory d. safety stock inventory e. All of these are main types of inventory. - Answers d. safety stock inventory Which of the following statements about ABC analysis is false? a. ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. b. In ABC analysis, "A" Items are tightly controlled, have accurate records, and receive regular review by major decision makers. c. In ABC analysis, "C" Items have minimal records, periodic review, and simple controls. d. ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. e. All of the above statements are true. - Answers d. ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. All of the following statements about ABC analysis are true except a. inventory may be categorized by measures other than dollar volume b. it categorizes on-hand inventory into three groups based on annual dollar volume c. it is an application of the Pareto principle d. it states that all items require the same degree of control e. it states that there are the critical few and the trivial many inventory items - Answers d. it states that all items require the same degree of control ABC analysis is based upon the principle that a. all items in inventory must be monitored very closely b. there are usually a few critical items, and many items which are less critical c. an item is critical if its usage is high d. more time should be spent on class "C" items because there are more of them e. an item is critical if its unit price is high - Answers b. there are usually a few critical items, and many items which are less critical ABC analysis divides on-hand inventory into three classes, generally based upon a. item quality b. unit price c. the number of units on hand d. annual demand e. annual dollar volume - Answers e. annual dollar volume Cycle counting a. is a process by which inventory records are verified once a year b. provides a measure of inventory accuracy c. provides a measure of inventory turnover d. assumes that all inventory records must be verified with the same frequency e. assumes that the most frequently used items must be counted more frequently - Answers b. provides a measure of inventory accuracy Which of the following statements regarding control of service inventories is true? a. Service inventory is a fictional concept, because services are intangible. b. Service inventory needs no safety stock, because there's no such thing as a service stockout. c. Effective control of all goods leaving the facility is one applicable technique. d. Service inventory has carrying costs but not setup costs. e. All of the above are true. - Answers c. Effective control of all goods leaving the facility is one applicable technique. The two most basic inventory questions answered by the typical inventory model are a. timing and cost of orders b. quantity and cost of orders c. timing and quantity of orders d. order quantity and service level e. ordering cost and carrying cost - Answers c. timing and quantity of orders Among the advantages of cycle counting is that it a. makes the annual physical inventory more acceptable to management b. does not require the detailed records necessary when annual physical inventory is used c. does not require highly trained people d. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory e. does not need to be performed for less expensive items - Answers d. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory Which of the following are elements of inventory holding costs? a. housing costs b. material handling costs c. investment costs d. pilferage, scrap, and obsolescence e. All of the above are elements of inventory holding cost. - Answers e. All of the above are elements of inventory holding cost. A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity? a. 16 b. 70 c. 110 d. 183 e. 600 - Answers c. 110 Most inventory models attempt to minimize a. the likelihood of a stockout b. the number of items ordered c. total inventory based costs d. the number of orders placed e. the safety stock - Answers c. total inventory based costs In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will a. increase by about 41% b. increase by 100% c. increase by 200% d. increase, but more data is needed to say by how much e. either increase or decrease - Answers a. increase by about 41% In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately a. 24 b. 100 c. 141 d. 490 e. 600 - Answers c. 141 Which of the following statements about the basic EOQ model is true? a. If the ordering cost were to double, the EOQ would rise. b. If annual demand were to double, the EOQ would increase. c. If the carrying cost were to increase, the EOQ would fall. d. If annual demand were to double, the number of orders per year would increase. e. All of the above statements are true. - Answers e. All of the above statements are true. Which of the following statements about the basic EOQ model is false? a. If the setup cost were to decrease, the EOQ would fall. b. If annual demand were to increase, the EOQ would increase. c. If the ordering cost were to increase, the EOQ would rise. d. If annual demand were to double, the EOQ would also double. e. All of the above statements are true. - Answers d. If annual demand were to double, the EOQ would also double. A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is a. three times as large b. one-third as large c. nine times as large d. one-ninth as large e. cannot be determined - Answers b. one-third as large A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is a. unchanged b. increased by less than 50% c. increased by 50% d. increased by more than 50% e. cannot be determined - Answers b. increased by less than 50% For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is a. $1.50 b. $2.00 c. $3.00 d. $150.00 e. not enough data to determine - Answers c. $3.00 A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost _____ per year in total annual inventory costs. a. $400 b. $800 c. $1200 d. zero; this is a class C item e. cannot be determined because unit price is not known - Answers b. $800 A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order a. all 4000 units at one time b. 200 units per order c. every 20 days d. 10 times per year e. none of the above - Answers b. 200 units per order Which of the following statements regarding the reorder point is true? a. The reorder point is that quantity that triggers an action to restock an item. b. There is a reorder point even if lead time and demand during lead time are constant. c. The reorder point is larger than d x L if safety stock is present. d. The fixed-period model has no reorder point. e. All of the above are true. - Answers e. All of the above are true. The EOQ model with quantity discounts attempts to determine a. what is the lowest amount of inventory necessary to satisfy a certain service level b. what is the lowest purchasing price c. whether to use fixed-quantity or fixed-period order policy d. how many units should be ordered e. what is the shortest lead time - Answers d. how many units should be ordered An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true? a. One hundred is the reorder point, and 14 is the order quantity. b. Fourteen is the reorder point, and 100 is the order quantity. c. The number 100 is a function of demand during lead time. d. Fourteen is the safety stock, and 100 is the reorder point. e. None of the above is true. - Answers b. Fourteen is the reorder point, and 100 is the order quantity. Which of the following statements regarding the production order quantity model is true? a. It applies only to items produced in the firm's own production departments. b. It relaxes the assumption that all the order quantity is received at one time. c. It relaxes the assumption that the demand rate is constant. d. It minimizes the total production costs. e. It minimizes inventory. - Answers b. It relaxes the assumption that all the order quantity is received at one time. Which of these statements about the production order quantity model is false? a. The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous. b. Because receipt is noninstantaneous, some units are used immediately, not stored in inventory. c. Average inventory is less than one-half of the production order quantity. d. All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity. e. None of the above is false. - Answers d. All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity. The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. The production order quantity for this problem is approximately a. 139 b. 174 c. 184 d. 365 e. 548 - Answers c. 184 A production order quantity problem has daily demand rate = 10 and daily production rate = 50. The production order quantity for this problem is approximately 612 units. The average inventory for this problem is approximately a. 61 b. 245 c. 300 d. 306 e. 490 - Answers b. 245 Which category of inventory holding costs is much higher than average for rapid-change industries such as PCs and cell phones? a. housing costs b. material handling costs c. labor cost d. parts cost e. pilferage, scrap, and obsolescence - Answers e. pilferage, scrap, and obsolescence When quantity discounts are allowed, the cost-minimizing order quantity a. is always an EOQ quantity b. minimizes the sum of holding and ordering costs c. minimizes the unit purchase price d. may be a quantity below that at which one qualifies for that price e. minimizes the sum of holding, ordering, and product costs - Answers e. minimizes the sum of holding, ordering, and product costs Which of the following statements about quantity discounts is false? a. The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. b. In inventory management, item cost becomes relevant to inventory decisions only when a quantity discount is available. c. If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule. d. The larger annual demand, the less attractive a discount schedule will be. e. The smaller the ordering cost, the less attractive a discount schedule will be. - Answers d. The larger annual demand, the less attractive a discount schedule will be. What is the practice of procuring from external sources services or products that are normally part of an organization? a. nearshoring b. farshoring c. offshoring d. outsourcing e. backsourcing - Answers d. outsourcing What is the practice of moving a business process to a foreign country but retaining control of it? a. exporting b. farshoring c. offshoring d. outsourcing e. backsourcing - Answers c. offshoring At Hard Rock Café, tasks that reflect operations or operations management include a. designing meals b. testing meals (recipes) c. analyzing meals for the cost of ingredients d. preparing employee schedules e. all of the above - Answers e. all of the above An operations task performed at Hard Rock Café is a. borrowing funds to build a new restaurant b. advertising changes in the restaurant menu c. calculating restaurant profit and loss d. preparing employee schedules e. all of the above - Answers d. preparing employee schedules Operations management is applicable a. mostly to the service sector b. to services exclusively c. mostly to the manufacturing sector d. to all firms, whether manufacturing and service e. to the manufacturing sector exclusively - Answers d. to all firms, whether manufacturing and service Which of the following are the primary functions of all organizations? a. operations, marketing, and human resources b. marketing, human resources, and finance/accounting c. sales, quality control, and operations d. marketing, operations, and finance/accounting e. research and development, finance/accounting, and purchasing - Answers d. marketing, operations, and finance/accounting Budgeting, paying the bills, and collection of funds are activities associated with the a. management function b. control function c. finance/accounting function d. production/operations function e. staffing function - Answers c. finance/accounting function Which of the following would not be an operations function in a fast-food restaurant? a. advertising and promotion b. designing the layout of the facility c. maintaining equipment d. making hamburgers and fries e. purchasing ingredients - Answers a. advertising and promotion The marketing function's main concern is with a. producing goods or providing services b. procuring materials, supplies, and equipment c. building and maintaining a positive image d. generating the demand for the organization's products or services e. securing monetary resources - Answers d. generating the demand for the organization's products or services The five elements in the management process are a. plan, direct, update, lead, and supervise b. accounting/finance, marketing, operations, and management c. organize, plan, control, staff, and manage d. plan, organize, staff, lead, and control e. plan, lead, organize, manage, and control - Answers d. plan, organize, staff, lead, and control Illiteracy and poor diets have been known to cost countries up to what percent of their productivity? a. 2% b. 5% c. 10% d. 20% e. 50% - Answers d. 20% Which of the following is not an element of the management process? a. controlling b. leading c. planning d. pricing e. staffing - Answers d. pricing An operations manager is not likely to be involved in a. the design of goods and services to satisfy customers' wants and needs b. the quality of goods and services to satisfy customers' wants and needs c. the identification of customers' wants and needs d. work scheduling to meet the due dates promised to customers e. maintenance schedules - Answers c. the identification of customers' wants and needs