ISQS 3344 EVALUATION EXAM 2026/2027 QUESTIONS
AND SOLUTIONS RATED A+
✔✔_______ can be described as a surplus amount of inventory which is kept,
exceeding the average amount needed to meet demand.
a.
Safety stock inventory
b.
Finished-goods inventory
c.
Seasonal inventory
d.
Work-in-process inventory - ✔✔A
✔✔Which type of costs can be representative of service interruptions or backorders for
external customers, from the standpoint of inventory costs?
a.
Setup costs
b.
Stockout costs
c.
Holding costs
d.
Ordering costs - ✔✔b
✔✔Which system or model should be used when the inventory situation is the following:
strictly one order is placed for a good in anticipation of a future selling season and its
demand is subject to considerable uncertainty?
a.
The deliver-lag inventory model
b.
A fixed-quantity inventory system
c.
The single-period inventory model
d.
A fixed-period inventory system - ✔✔c
,✔✔Recall ABC inventory analysis. Choose the most accurate statement below as it
pertains to class C items.
a.
They can be managed using automated computer systems.
b.
They require close control by operations managers.
c.
They make up less than 10 percent of inventory items.
d.
They comprise more than 80 percent of the total dollar usage. - ✔✔a
✔✔Environmentally preferable purchasing - ✔✔EPP or green purchasing
Affirmative selection and acquisition of products and services that effectively minimize
negative environmental impacts
-manufacturing
-transportation
-use
-recycle or disposal
✔✔Inventory Cost Categories - ✔✔Ordering/Setup Costs
Inventory-Holding.Carrying Costs
Shortage/Stockout Costs
Unit cost of purchasing or producing one item
✔✔Ordering Costs - ✔✔AKA Setup Costs
Result of work involved in placing purchase orders with suppliers
Number of orders per year = Annual Demand / Order Quantity
-Transportation + Shipping
-Requisition and purchase order costs
-Receiving, Inspection, Handling
-Accounting, Auditing Costs
Transportation costs passed to the supplier
✔✔Inventory-Holding Costs - ✔✔Or Carrying costs
Expenses associated with carrying inventory
-Facility storage (rent, depreciation, power, heat, lighting, security, taxes, insurance, etc)
-Material handling (equip)
-Labor, Record keeping
-Borrowing to purchase inventory
-Product deterioration, spoilage, breakage, obsolescence, pilferage
,✔✔Shortage Costs - ✔✔AKA Stockout Costs
Opportunity Costs
Associated with inventory being unavailable to meet demand
Ignored in simple inventory models assuming there are no shortages
Consider when safety costs are added to reorder point: R = d*L+safety stock
Safety stock reduces likelihood of shortage to roughly 1% of the time
✔✔*****
Bright Tots Toys manages its inventories by utilizing a fixed-quantity system. Batteries
and plastic are included in their inventory. A manager reports that the company
frequently finds itself dealing with a stockout of plastic. The 7-day demand for plastic is
50 pounds, on average. Further, the standard deviation of 7-day demand is
approximately 5. The lead time from the plastic supplier is 21 days. The acceptable
service level is 95 percent, and the number of standard deviations required to reach the
acceptable service level is 1.645. With all of this in mind, the reorder point for plastic
with safety stock is ________.
a.
more than 225 pounds
b.
more than 175 pounds but less than or equal to 225 pounds
c.
more than 125 pounds but less than or equal to 175 pounds
d.
less than or equal to 125 pounds - ✔✔
✔✔Stock-Keeping Unit - ✔✔a single item or asset stored at a particular location
✔✔Independent Demand - ✔✔demand for a SKU that is unrelated to the demand for
other SKUs and needs to be forecasted
✔✔Dependent Demand - ✔✔directly related to the demand of other SKUs and can be
calculated without needing to be forecasted
✔✔Static Demand - ✔✔Stable in nature
✔✔Dynamic Demand - ✔✔demand that varies over time
✔✔Lead Time - ✔✔Time between placement of an order and its receipt
✔✔Stockouts - ✔✔Inability to satisfy the demand for an item
-Backorder
-Lost sale
, ✔✔Backorder - ✔✔occurs when a customer is willing to wait for the item after
purchasing
✔✔Lost sale - ✔✔occurs when the customer is unwilling to wait and purchases the item
elsewhere
✔✔Suppose you have an inventory situation where a single order is placed for a good.
The selling season for that good isn't for some time. Furthermore, the demand for that
good is uncertain. This scenario characterizes _______.
a.
a fixed-quantity inventory system
b.
a fixed-period inventory system
c.
the deliver-lag inventory model
d.
the single-period inventory - ✔✔d
✔✔ABC Inventory Analysis - ✔✔Categorizes SKUs into groups according to the total
annual dollar usage
Total dollar usage = Item usage (volume) x Item's dollar value (unit cost)
✔✔A Items - ✔✔Account for a large dollar value but a relatively small percentage of
total items
✔✔C Items - ✔✔Account for a small dollar value but a large percentage of total items
✔✔B Items - ✔✔Items between A and C
✔✔Stable demand is typically referred to as ________.
a.
dynamic demand
b.
static demand
c.
unwholesome demand
AND SOLUTIONS RATED A+
✔✔_______ can be described as a surplus amount of inventory which is kept,
exceeding the average amount needed to meet demand.
a.
Safety stock inventory
b.
Finished-goods inventory
c.
Seasonal inventory
d.
Work-in-process inventory - ✔✔A
✔✔Which type of costs can be representative of service interruptions or backorders for
external customers, from the standpoint of inventory costs?
a.
Setup costs
b.
Stockout costs
c.
Holding costs
d.
Ordering costs - ✔✔b
✔✔Which system or model should be used when the inventory situation is the following:
strictly one order is placed for a good in anticipation of a future selling season and its
demand is subject to considerable uncertainty?
a.
The deliver-lag inventory model
b.
A fixed-quantity inventory system
c.
The single-period inventory model
d.
A fixed-period inventory system - ✔✔c
,✔✔Recall ABC inventory analysis. Choose the most accurate statement below as it
pertains to class C items.
a.
They can be managed using automated computer systems.
b.
They require close control by operations managers.
c.
They make up less than 10 percent of inventory items.
d.
They comprise more than 80 percent of the total dollar usage. - ✔✔a
✔✔Environmentally preferable purchasing - ✔✔EPP or green purchasing
Affirmative selection and acquisition of products and services that effectively minimize
negative environmental impacts
-manufacturing
-transportation
-use
-recycle or disposal
✔✔Inventory Cost Categories - ✔✔Ordering/Setup Costs
Inventory-Holding.Carrying Costs
Shortage/Stockout Costs
Unit cost of purchasing or producing one item
✔✔Ordering Costs - ✔✔AKA Setup Costs
Result of work involved in placing purchase orders with suppliers
Number of orders per year = Annual Demand / Order Quantity
-Transportation + Shipping
-Requisition and purchase order costs
-Receiving, Inspection, Handling
-Accounting, Auditing Costs
Transportation costs passed to the supplier
✔✔Inventory-Holding Costs - ✔✔Or Carrying costs
Expenses associated with carrying inventory
-Facility storage (rent, depreciation, power, heat, lighting, security, taxes, insurance, etc)
-Material handling (equip)
-Labor, Record keeping
-Borrowing to purchase inventory
-Product deterioration, spoilage, breakage, obsolescence, pilferage
,✔✔Shortage Costs - ✔✔AKA Stockout Costs
Opportunity Costs
Associated with inventory being unavailable to meet demand
Ignored in simple inventory models assuming there are no shortages
Consider when safety costs are added to reorder point: R = d*L+safety stock
Safety stock reduces likelihood of shortage to roughly 1% of the time
✔✔*****
Bright Tots Toys manages its inventories by utilizing a fixed-quantity system. Batteries
and plastic are included in their inventory. A manager reports that the company
frequently finds itself dealing with a stockout of plastic. The 7-day demand for plastic is
50 pounds, on average. Further, the standard deviation of 7-day demand is
approximately 5. The lead time from the plastic supplier is 21 days. The acceptable
service level is 95 percent, and the number of standard deviations required to reach the
acceptable service level is 1.645. With all of this in mind, the reorder point for plastic
with safety stock is ________.
a.
more than 225 pounds
b.
more than 175 pounds but less than or equal to 225 pounds
c.
more than 125 pounds but less than or equal to 175 pounds
d.
less than or equal to 125 pounds - ✔✔
✔✔Stock-Keeping Unit - ✔✔a single item or asset stored at a particular location
✔✔Independent Demand - ✔✔demand for a SKU that is unrelated to the demand for
other SKUs and needs to be forecasted
✔✔Dependent Demand - ✔✔directly related to the demand of other SKUs and can be
calculated without needing to be forecasted
✔✔Static Demand - ✔✔Stable in nature
✔✔Dynamic Demand - ✔✔demand that varies over time
✔✔Lead Time - ✔✔Time between placement of an order and its receipt
✔✔Stockouts - ✔✔Inability to satisfy the demand for an item
-Backorder
-Lost sale
, ✔✔Backorder - ✔✔occurs when a customer is willing to wait for the item after
purchasing
✔✔Lost sale - ✔✔occurs when the customer is unwilling to wait and purchases the item
elsewhere
✔✔Suppose you have an inventory situation where a single order is placed for a good.
The selling season for that good isn't for some time. Furthermore, the demand for that
good is uncertain. This scenario characterizes _______.
a.
a fixed-quantity inventory system
b.
a fixed-period inventory system
c.
the deliver-lag inventory model
d.
the single-period inventory - ✔✔d
✔✔ABC Inventory Analysis - ✔✔Categorizes SKUs into groups according to the total
annual dollar usage
Total dollar usage = Item usage (volume) x Item's dollar value (unit cost)
✔✔A Items - ✔✔Account for a large dollar value but a relatively small percentage of
total items
✔✔C Items - ✔✔Account for a small dollar value but a large percentage of total items
✔✔B Items - ✔✔Items between A and C
✔✔Stable demand is typically referred to as ________.
a.
dynamic demand
b.
static demand
c.
unwholesome demand
