1. Prevents economies of scale is not one of the five purposes that inventory serves. The five purposes are to balance supply and demand, enable specialization in manufacturing, provide protection from uncertainties in demand and order cycle time, and act as a buffer between critical interfaces within the supply chain. 2. Variability in demand increases safety stock in order to prevent stockouts when demand is unpredictable. 3. Speculative stock is held in inventory because of demand uncertainty - it is used to meet future demand when forecasts predict increases.

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1.Which of the following is NOT one of
the five purposes that inventory
serves?
A. Prevents economies of scale
B. Balances supply and demand
C. Enables specialization in manufacturing
D. Provides protection from uncertainties in demand
and order cycle time
E. Acts as a buffer between critical interfaces within the
supply chain
2.Variability in demand increases
safety stock.
A. True
B. False

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3.Speculative stock is held in
inventory because of…
A. Demand uncertainty
B. Forecasted price increases
C. Variability in lead times
D. Manufacturing requirements
4.Seasonal stock is used to prevent
stockouts.
A. True
B. False

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5. Dead stock is…
A. Ready to be shipped
B. Being held for extended periods of time
C. The same as safety stock
D. Stock that is obsolete
6. The economic order quantity
model (EOQ)…
A. Eliminates inventory carrying costs
B. Maximizes output
C. Minimizes the total of inventory carrying costs and
ordering costs
D. Has no effect on inventory carrying costs

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7. Which of the following does NOT
influence forecasting accuracy?
A. Economic conditions
B. Competitive actions
C. Changes in government regulations
D. Market shifts
E. All of the above influence forecasting accuracy
8. ______ represents the
magnitude of a stockout.
A. Fill rate
B. EOQ
C. Replenishment cycle
D. Fixed Order Interval Model

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9. The Fixed Order Interval Model is
used when orders must be placed at
fixed time intervals.
A. True
B. False
10. In a fixed-quantity arrangement,
orders are triggered by a time.
A. True
B. False

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11. Which of the following is not a
goal of purchasing?
A. Keep inventory investment and loss at a minimum
B. Find or develop competent suppliers
C. Forecast accurate demand for materials purchased
D. Purchase items and services at lowest total cost
12. In the acquisition process, the most
important activity is thought to be…
A. Purchasing the right quantity
B. Selecting the best supplier
C. Purchasing materials and services at lowest cost
D. Minimize lead time

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13. Which of the following is NOT a
major product category that is
purchased by most companies?
A. Component parts
B. Raw materials
C. Operating supplies
D. Process equipment
E. All of the above are major categories purchased by
most companies
14. Supplier certification is thought to
be better than inspection programs.
A. True
B. False

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15. Just in time is…
A. A specific method of managing inventory
B. More of a philosophy of doing business
C. Uses detailed specifications
D. Promotes safety stock
16. Which of the following is not an
important part of JIT?
A. Safety Stock
B. Buyer/Supplier Communication
C. Purchaser/Supplier relationship
D. All of the above are important parts of JIT

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17. Which of the following is not an
issue related to supplier selection?
A. Quality control methods
B. Supplier proximity
C. Manufacturing flexibility
D. Lead time reliability
E. All of the above are issues related to supplier selection
18. JIT manufacturers and their
suppliers generally have short term
contracts
A. True
B. False

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19. Which of the following is not a
benefit of JIT?
A. Lower inventory carrying costs
B. Production levels are relatively level
C. Demand for materials is more predictable
D. Increased sales
20. An In-Plant Representative…
A. Is a supplier in the buying company’s office
B. Often replaces a purchaser, planner, and a
salesperson
C. Is associated with JIT II
D. All of the above

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21. Typical Criteria to use in
identifying critical purchases are…
A. Percentage of product cost
B. Percentage of total purchase expenditure
C. Use on high-margin end items
D. A and C
E. All of the above
22. All of the following are ways to
reduce inventory levels except…
A. Lead time analysis
B. Measurement of fill rate by SKU
C. Eliminating high turnover
D. Analysis of customer demand characteristics
E. All of the above

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23. All of the following are symptoms of
poor inventory management except…
A. Decreasing number of backorders
B. Increasing number of orders being canceled
C. Large quantities of obsolete items
D. Wide variance in inventory turnover
E. All of the above
24. The idea behind ABC analysis is that 20%
of a firms customers or products accounts
for 80% of the sales
A. True
B. False

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25. Many companies use ERP
systems to improve…
A. Materials management
B. Plant management
C. Quality management
D. Production planning and control
E. All of the above
26. A primary goal of inventory management is to
achieve an optimum balance between inventory
carrying costs and customer service.
A. True
B. False

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27. Cost reduction and cost avoidance
programs include all of the following
except…
A. Supplier development
B. Standardization
C. Make or Buy analysis
D. Increase in inventory
28. Which of the following is not a
performance measure?
A. Price effectiveness
B. Value analysis
C. Material flow control
D. Cost savings
E. All of the above

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29. System contracts are a means
of reducing materials related costs
A. True
B. False
30. All of the following are objectives of
system contracts and stockless
purchasing except…
A. Lower inventory levels
B. Increase in number of suppliers
C. Reduction in administrative cost and paperwork
D. Timely delivery of material directly to user
E. All of the above

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31. ______ is a physical resource that a firm holds
in stock with the intent of selling it or
transforming it into a more valuable state.
A. Raw materials
B. Work-in-process
C. Inventory
D. Finished goods
32. Inventory impacts all of the
following except…
A. Customer Satisfaction
B. Logistics activity performance
C. Company performance
D. Forecasting accuracy
E. All of the above are impacted by inventory

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33. Which of the following is not an
objective of inventory?
A. Fulfill corporate policies and goals
B. Create customer demand
C. Minimize total logistics activities
D. Promote corporate profitability
E. All of the above are objectives of inventory
34. The three types of inventory are…
 Raw materials
 Work-in-process
 Finished goods

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35. Which of the following is not a key
decision of inventory?
A. How much to order
B. When to order
C. Where to hold inventory
D. When to substitute transportation for inventory
E. All of the above are key decisions of inventory
36. Which of the following is NOT an
aspect of inventory that must be
managed?
A. Holding costs
B. Number of products
C. Value analysis
D. Lead time
E. All of the above are aspects of inventory that must be
managed

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37. All of the following are internal
measurements of inventory except…
A. Inventory turn
B. Selling days on hand
C. Backorder level
D. Inventory sales to ratio
E. All of the above are internal measurements
38. Which of the following is NOT an
external measurement of inventory?
A. Customer service level
B. Customer delivery quantity
C. Customer delivery cycle time
D. ABC analysis

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39. All of the following are symptoms of
poor inventory management except…
A. Decreasing numbers in backorders
B. Higher customer turnover rate
C. Periodic lack of storage space
D. Increasing number of canceled orders
E. All of the above are symptoms of poor inventory
management
40. Which of the following is NOT a
strategy to manage inventory?
A. ABC analysis
B. Real-time visibility
C. Inventory models
D. Centralized decision making
E. All of the above are strategies to manage inventory