SCM 300 EXAM 2 – EXAM QUESTIONS AND
CORRECT ANSWERS (VERIFIED ANSWERS)
PLUS RATIONALE | 2027 Q&A | INSTANT
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1. What is the primary objective of supply chain management?
A. Maximize inventory levels
B. Minimize transportation regardless of service
C. Coordinate supply-chain activities to create value for customers efficiently
D. Eliminate all suppliers
Correct Answer: C
Rationale: Supply chain management coordinates sourcing, production, transportation,
inventory, and related activities to meet customer needs while creating value efficiently.
2. Which activity is most closely associated with procurement?
A. Customer complaint resolution
B. Acquiring goods and services from suppliers
C. Product advertising
D. Retail store layout
Correct Answer: B
Rationale: Procurement involves identifying suppliers, negotiating terms, purchasing
goods/services, and managing supplier relationships.
3. What does lead time represent?
A. The amount of inventory held in a warehouse
B. The time between placing an order and receiving it
C. The number of suppliers available
D. The cost of transporting a product
Correct Answer: B
Rationale: Lead time is the elapsed time from initiating an order or process until the required
goods or services are received or completed.
,4. A company keeps extra inventory to protect against unexpected demand
or supply disruptions. This inventory is called:
A. Cycle stock
B. Safety stock
C. Pipeline stock
D. Obsolete stock
Correct Answer: B
Rationale: Safety stock provides protection against uncertainty in demand, supply, and lead
time.
5. Which inventory cost increases as the quantity of inventory held
increases?
A. Ordering cost
B. Holding cost
C. Setup cost only
D. Stockout cost only
Correct Answer: B
Rationale: Holding or carrying costs include storage, insurance, deterioration, obsolescence, and
the opportunity cost of invested capital.
6. The Economic Order Quantity (EOQ) model primarily determines:
A. The optimal order quantity
B. The number of warehouses required
C. The selling price
D. The number of employees needed
Correct Answer: A
Rationale: EOQ identifies an order quantity that balances ordering costs and inventory carrying
costs under specified assumptions.
, 7. Which two costs are primarily balanced by the basic EOQ model?
A. Labor and transportation
B. Ordering and holding costs
C. Marketing and advertising
D. Production and quality costs
Correct Answer: B
Rationale: EOQ seeks to minimize the combined annual ordering and holding costs.
8. If annual demand increases while other EOQ factors remain constant,
the EOQ will generally:
A. Increase
B. Decrease
C. Become zero
D. Remain exactly the same
Correct Answer: A
Rationale: EOQ is proportional to the square root of annual demand. Higher demand therefore
generally results in a larger optimal order quantity.
9. What is a stockout?
A. Excess inventory in a warehouse
B. Inventory that has become obsolete
C. A situation in which required inventory is unavailable
D. Inventory being transported between facilities
Correct Answer: C
Rationale: A stockout occurs when demand cannot be fulfilled because the required item is
unavailable.
10. Which forecasting approach relies primarily on historical numerical
data?
A. Qualitative forecasting
B. Quantitative forecasting
CORRECT ANSWERS (VERIFIED ANSWERS)
PLUS RATIONALE | 2027 Q&A | INSTANT
DOWNLOAD PDF
1. What is the primary objective of supply chain management?
A. Maximize inventory levels
B. Minimize transportation regardless of service
C. Coordinate supply-chain activities to create value for customers efficiently
D. Eliminate all suppliers
Correct Answer: C
Rationale: Supply chain management coordinates sourcing, production, transportation,
inventory, and related activities to meet customer needs while creating value efficiently.
2. Which activity is most closely associated with procurement?
A. Customer complaint resolution
B. Acquiring goods and services from suppliers
C. Product advertising
D. Retail store layout
Correct Answer: B
Rationale: Procurement involves identifying suppliers, negotiating terms, purchasing
goods/services, and managing supplier relationships.
3. What does lead time represent?
A. The amount of inventory held in a warehouse
B. The time between placing an order and receiving it
C. The number of suppliers available
D. The cost of transporting a product
Correct Answer: B
Rationale: Lead time is the elapsed time from initiating an order or process until the required
goods or services are received or completed.
,4. A company keeps extra inventory to protect against unexpected demand
or supply disruptions. This inventory is called:
A. Cycle stock
B. Safety stock
C. Pipeline stock
D. Obsolete stock
Correct Answer: B
Rationale: Safety stock provides protection against uncertainty in demand, supply, and lead
time.
5. Which inventory cost increases as the quantity of inventory held
increases?
A. Ordering cost
B. Holding cost
C. Setup cost only
D. Stockout cost only
Correct Answer: B
Rationale: Holding or carrying costs include storage, insurance, deterioration, obsolescence, and
the opportunity cost of invested capital.
6. The Economic Order Quantity (EOQ) model primarily determines:
A. The optimal order quantity
B. The number of warehouses required
C. The selling price
D. The number of employees needed
Correct Answer: A
Rationale: EOQ identifies an order quantity that balances ordering costs and inventory carrying
costs under specified assumptions.
, 7. Which two costs are primarily balanced by the basic EOQ model?
A. Labor and transportation
B. Ordering and holding costs
C. Marketing and advertising
D. Production and quality costs
Correct Answer: B
Rationale: EOQ seeks to minimize the combined annual ordering and holding costs.
8. If annual demand increases while other EOQ factors remain constant,
the EOQ will generally:
A. Increase
B. Decrease
C. Become zero
D. Remain exactly the same
Correct Answer: A
Rationale: EOQ is proportional to the square root of annual demand. Higher demand therefore
generally results in a larger optimal order quantity.
9. What is a stockout?
A. Excess inventory in a warehouse
B. Inventory that has become obsolete
C. A situation in which required inventory is unavailable
D. Inventory being transported between facilities
Correct Answer: C
Rationale: A stockout occurs when demand cannot be fulfilled because the required item is
unavailable.
10. Which forecasting approach relies primarily on historical numerical
data?
A. Qualitative forecasting
B. Quantitative forecasting
