Q.1) A quantity discount is attractive because there is a drop in the price per unit when the order is sufficiently large.

TRUE

FALSE

Q.2) Inventory management is the planning and controlling of inventories in order to meet the competitive priorities of the organization.

TRUE

FALSE

Q.3) When looking at inventory management, the term "lot size" refers to the physical dimensions of the area where the inventory is stored.

TRUE

FALSE

4) When looking at inventory management, the term "lot size" refers to the quantity of an inventory item management either buys from a supplier or manufactures using internal processes.

TRUE

FALSE

Q.5) The primary reason for keeping inventories low is that inventory represents a temporary monetary investment.

TRUE

FALSE

Q.6) One component of the holding cost of inventory is interest.

TRUE

FALSE

Q.7) One component of the ordering cost of inventory is shrinkage.

TRUE

FALSE

Q.8) A stockout occurs when an item that is typically stocked is not available to satisfy a demand the moment it occurs.

TRUE

FALSE

Q.9) A backorder occurs when a customer order cannot be filled when it is placed, but is instead filled later.

TRUE

FALSE

Q.10) Setup cost is independent of order size.

TRUE

FALSE

Q.11) The term lot size signifies:

A) the total production of a single SKU for a one-year period.

B) the physical dimensions of the raw materials used to make a batch of one SKU.

C) the dimensions of the container used to ship an order to any location outside of company property.

D) the number of units of a single item that a company buys from a supplier.

Q.12) Which of the following generates pressure to increase inventories?

A) inventory holding costs

B) ordering costs

C) storage and handling costs

D) taxes and insurance

Q.13) Which of the following generates pressure to decrease inventories?

A) inventory shrinkage costs

B) backorders and stockouts

C) transportation costs

D) quantity discounts

Q.14) Which of the following does NOT generate pressure to decrease inventories?

A) taxes and insurance

B) inventory holding costs

C) storage and handling costs

D) ordering costs

Q.15) Which of the following does NOT generate pressure to increase inventories?

A) transportation costs

B) backorders and stockouts

C) inventory shrinkage costs

D) quantity discounts

Q.16) ________ is the planning and controlling of inventories in order to meet the competitive priorities of the organization.

Q.17) The term ________ refers to the quantity of an item that is purchased from a supplier; the term ________ is used to refer to the size of the batch that is produced using internal processes.

Q.18) Inventory ________ cost is the variable cost of keeping items on hand, such as storage and handling, taxes, insurance, and shrinkage.

Subjective Question

Q. 1 What are the advantages and disadvantages of the supply chain implications of the lean system emphasizing on small lot sizes?

Q.2 What is a two-bin system and how does it work?

Q.3 Apply your understanding of forecasting to the idea of developing a reorder point for uncertain demand. What could be done to make a reorder point more accurate?