GMS 401 Final Exam Questions And
Answers
Which of the following statements regarding Amazon.com 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. - ANS 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. - ANS 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. - ANS 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. - ANS 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. - ANS 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 - ANS 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 - ANS 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 - ANS 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 - ANS 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. - ANS 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 - ANS 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 - ANS 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. - ANS 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 - ANS 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
Answers
Which of the following statements regarding Amazon.com 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. - ANS 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. - ANS 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. - ANS 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. - ANS 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. - ANS 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 - ANS 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 - ANS 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 - ANS 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 - ANS 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. - ANS 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 - ANS 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 - ANS 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. - ANS 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 - ANS 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
