SCMA 331 Final Exam| Questions and Answer 2023
According to the global company profile, Amazon.com's advantage in inventory management comes
from its almost fanatical use of economic order quantity and safety stock calculations. Answer - False
A major challenge in inventory management is to maintain a balance between inventory investment and
customer service. Answer - True
Which item to order and with which supplier the order should be placed are the two fundamental issues
in inventory management. Answer - False
One function of inventory is to take advantage of quantity discounts. Answer - True
Work-in-process inventory is devoted to maintenance, repair, and operating materials. Answer - False
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 automation and management.
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. Answer - B
Which of the following is a function of inventory?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm from
fluctuations in that demand
C) to take advantage of quantity discounts
D) to hedge against inflation
E) All of the above are functions of inventory Answer - E
,Which of the following would NOT generally be a motive for a firm to hold inventories?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm from
fluctuations in that demand
C) to take advantage of quantity discounts
D) to minimize holding costs
E) to hedge against inflation Answer - D
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) finished-goods inventory Answer - D
Amazon's original concept of operating without inventory has given way to a model in which Amazon is a
world-class leader in ________. Answer - warehouse automation and management
Inventory that separates various parts of the production process performs a(n) ________ function.
Answer - decoupling
________ inventory is material that is usually purchased, but has yet to enter the manufacturing
process. Answer - Raw material
Explain what "decoupling" means in the context of inventory management. Answer - Decoupling means
to separate various parts of the production process. Each of the parts can then function at its own best
pace.
What are the four functions of inventory? Answer - (1) to provide a selection of goods for anticipated
customer demand and to separate the firm from fluctuations in that demand; (2) to decouple various
parts of the production process; (3) to take advantage of quantity discounts; and (4) to hedge against
inflation
,Identify the four types of inventory. Answer - (1) raw material inventory; (2) work-in-process inventory;
(3) maintenance/repair/operating supply (MRO) inventory; and (4) finished-goods inventory
What is MRO an acronym for? What is the function of MRO inventories? Answer - MRO inventories are
devoted to maintenance/repair/operating supplies. They exist because the need and timing for
maintenance and repair of some equipment are unknown.
ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities
used. Answer - False
In ABC analysis, "A" items are the most tightly controlled. Answer - True
ABC analysis is based on the presumption that carefully controlling all items is necessary to produce
important inventory savings. Answer - False
Cycle counting is an inventory control technique exclusively used for cyclical items. Answer - False
One advantage of cycle counting is that it maintains accurate inventory records. Answer - True
In cycle counting, the frequency of item counting and stock verification usually varies from item to item
depending upon the item's classification. Answer - True
Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage. Answer
- True
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 should have tighter physical inventory control than "B" or "C" items have.
C) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items.
, D) ABC analysis is based on the presumption that all items must be tightly controlled to produce
important cost savings.
E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can
determine item classification in ABC analysis. Answer - D
All EXCEPT which of the following statements about ABC analysis are true?
A) In ABC analysis, inventory may be categorized by measures other than dollar volume.
B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume.
C) ABC analysis is an application of the Pareto principle.
D) ABC analysis suggests that all items require the same high degree of control.
E) ABC analysis suggests that there are the critical few and the trivial many inventory items. Answer - D
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 that 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 many more of them.
E) as with grade distributions in many MBA courses, there should be more medium-level "B" items than
either "A" or "C" items. Answer - B
ABC analysis divides on-hand inventory into three classes, generally based upon which of the following?
A) item quality
B) unit price
C) the number of units on hand
D) annual demand
E) annual dollar volume Answer - E
Cycle counting:
A) is a process by which inventory records are verified once a year.
B) eliminates annual inventory adjustments.
According to the global company profile, Amazon.com's advantage in inventory management comes
from its almost fanatical use of economic order quantity and safety stock calculations. Answer - False
A major challenge in inventory management is to maintain a balance between inventory investment and
customer service. Answer - True
Which item to order and with which supplier the order should be placed are the two fundamental issues
in inventory management. Answer - False
One function of inventory is to take advantage of quantity discounts. Answer - True
Work-in-process inventory is devoted to maintenance, repair, and operating materials. Answer - False
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 automation and management.
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. Answer - B
Which of the following is a function of inventory?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm from
fluctuations in that demand
C) to take advantage of quantity discounts
D) to hedge against inflation
E) All of the above are functions of inventory Answer - E
,Which of the following would NOT generally be a motive for a firm to hold inventories?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm from
fluctuations in that demand
C) to take advantage of quantity discounts
D) to minimize holding costs
E) to hedge against inflation Answer - D
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) finished-goods inventory Answer - D
Amazon's original concept of operating without inventory has given way to a model in which Amazon is a
world-class leader in ________. Answer - warehouse automation and management
Inventory that separates various parts of the production process performs a(n) ________ function.
Answer - decoupling
________ inventory is material that is usually purchased, but has yet to enter the manufacturing
process. Answer - Raw material
Explain what "decoupling" means in the context of inventory management. Answer - Decoupling means
to separate various parts of the production process. Each of the parts can then function at its own best
pace.
What are the four functions of inventory? Answer - (1) to provide a selection of goods for anticipated
customer demand and to separate the firm from fluctuations in that demand; (2) to decouple various
parts of the production process; (3) to take advantage of quantity discounts; and (4) to hedge against
inflation
,Identify the four types of inventory. Answer - (1) raw material inventory; (2) work-in-process inventory;
(3) maintenance/repair/operating supply (MRO) inventory; and (4) finished-goods inventory
What is MRO an acronym for? What is the function of MRO inventories? Answer - MRO inventories are
devoted to maintenance/repair/operating supplies. They exist because the need and timing for
maintenance and repair of some equipment are unknown.
ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities
used. Answer - False
In ABC analysis, "A" items are the most tightly controlled. Answer - True
ABC analysis is based on the presumption that carefully controlling all items is necessary to produce
important inventory savings. Answer - False
Cycle counting is an inventory control technique exclusively used for cyclical items. Answer - False
One advantage of cycle counting is that it maintains accurate inventory records. Answer - True
In cycle counting, the frequency of item counting and stock verification usually varies from item to item
depending upon the item's classification. Answer - True
Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage. Answer
- True
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 should have tighter physical inventory control than "B" or "C" items have.
C) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A" items.
, D) ABC analysis is based on the presumption that all items must be tightly controlled to produce
important cost savings.
E) Criteria other than annual dollar volume, such as high holding cost or delivery problems, can
determine item classification in ABC analysis. Answer - D
All EXCEPT which of the following statements about ABC analysis are true?
A) In ABC analysis, inventory may be categorized by measures other than dollar volume.
B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar volume.
C) ABC analysis is an application of the Pareto principle.
D) ABC analysis suggests that all items require the same high degree of control.
E) ABC analysis suggests that there are the critical few and the trivial many inventory items. Answer - D
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 that 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 many more of them.
E) as with grade distributions in many MBA courses, there should be more medium-level "B" items than
either "A" or "C" items. Answer - B
ABC analysis divides on-hand inventory into three classes, generally based upon which of the following?
A) item quality
B) unit price
C) the number of units on hand
D) annual demand
E) annual dollar volume Answer - E
Cycle counting:
A) is a process by which inventory records are verified once a year.
B) eliminates annual inventory adjustments.
