MCQ on Inventory Management with answers D.

Fixed order period inventory system

Answer: (B)
1. Which of the following is a type of inventory
system that is used to manage independent 7. In the ABC Analysis system the B category
demand items? stands for___.
A. Order point system A. Outstanding importance in value
B. Material Requirements Planning B. Comparatively unimportant in value
C. Time-phased Order Point C. Comparatively important in value
D. Enterprise Resource Planning D. Average importance in value
Answer: (C) Answer: (D)

2. Effective inventory management minimizes 8. Which among the following is a quantity of

the investment in inventory by effectively a specific item that is ordered from the
meeting the___. supplier and issued as a standard quantity to
A. Functional requirement the production process?
B. Customer requirements A. Safety stock
C. Process reliability B. Lot size
D. Sales forecasting of a firm C. Standard deviation
Answer: (A) D. Inventory control
Answer: (B)
3. To achieve ___ in purchasing and
transportation, goods may be purchased in 9. The economic order quantity formula is
larger quantities than the actual demand. taken using ___.
A. Continuation A. Differential calculus
B. Quality B. Integral calculus
C. Cost efficiency C. Vector calculus
D. Potential value D. Multivariate analysis
Answer: (C) Answer: (A)

4. Which of the following is the objective of 10. Which among the following components is
the enterprise resource planning system? calculated as the sum of the fixed costs that
A. Manage purchase orders happen each time an item is ordered?
B. Control the flow of dependent demand A. Carrying cost
inventories B. Order cost
C. Organise external management information C. Holding cost
D. Balance supply and demand D. Storing cost
Answer: (D) Answer: (B)

5. Which of the following models is used to 11. The price reductions offered to customers
calculate the timing of the inventory order? for large orders, to encourage them to
A. Economic order quantity model purchase in large quantities is known as ___.
B. Fixed order quantity model A. Freebies
C. Reorder point model B. Quantity discounts
D. Fixed order inventory model C. Normal discounts
Answer: (C) D. Premiums
Answer: (B)
6. The type of inventory method that
comprises a greater number of accounting 12. A company that maintains a sufficient
transactions is known as ___. safety margin by having extra inventory
A. Periodic inventory method against certain situations is termed as ___.
B. Perpetual inventory system A. inventory
C. Finished goods inventory method B. lot size
C. safety stock B. Proprietary ratio
D. lead C. Activity ratio
Answer: (C) D. Stock turnover ratio
Answer: (B)
13. Identify the mode of production that is
widely used in a production model and in the 19. Which among the following systems
assembly operations? provides a process that enables one to track
A. Round-robin mode product movement throughout the company?
B. Batch mode A. Item tracker system
C. Grid mode B. Product locator system
D. Parallel mode C. Memory locator system
Answer: (B) D. Real-time locator system
Answer: (B)
14. Which among the following costs is the
expense of storing inventory for a specified 20. Pareto’s law is related to ___ placement
period of time? theory.
A. Purchasing cost A. Item stratification
B. Carrying cost B. Special consideration
C. Financial cost C. Family grouping
D. Storing cost D. Inventory stratification
Answer: (B) Answer: (D)

15. Which of the following is the ratio of net 21. Identify the system that allows you to have
profit to net sales? strong control over items without necessarily
A. Net Operating ratio updating the location records?
B. Gross profit ratio A. Zoning systems
C. Pretax Profit ratio B. Fixed locator system
D. Net profit ratio C. Zone locator system
Answer: (D) D. Combining system
Answer: (B)
16. A method that uses a predetermined
overhead rate to allocate overhead costs is 22. Manufacturers actually print the labels
known as ___. provided to them and serial numbers to aid in
A. Plant-wide allocation ___.
B. Shipping allocation A. Quality audit
C. Department allocation B. Quality control
D. Production-wide allocation C. Auditing process
Answer: (A) D. Product quality
Answer: (B)
17. Which of the following costs is estimated
by multiplying the quantity determined in the 23. The method of item placement that can
bill of materials to the cost of each accidentally substitute an item onto another is
component? ___.
A. Operating A. Family grouping
B. Production B. Part grouping
C. Labour C. ABC categorization
D. Material D. Category mapping
Answer: (D) Answer: (A)

18. A long-term solvency or leverage ratio is 24. The movements of stock must be
called ___. controlled with information regarding ___.
A. Net profit ratio A. Space utilization
B. Order status A. Logistics system
C. Labour utilization B. Pull distribution system
D. Material protection C. Inventory management system
Answer: (B) D. Push distribution system
Answer: (A)
25. An alteration to the method of setting up
zones or areas in the depot and assigning it to 31. Which among the following improves the
one person to each area is called ___. overall performance of the organization and
A. Zone logic helps to achieve efficient distribution and
B. Zone allocation delivery system?
C. Sequential zone system A. Just-in-Time
D. Random zone system B. Master Production System
Answer: (C) C. Customer responsiveness
D. Lead-time offsetting
Answer: (A)
26. Which among the following refers to areas
where items are not stored in selected
permanent locations? 32. The rules that govern a barcode are
A. Fixed location specified in the ___.
B. Random location A. Codabar
C. Location sequence B. Symbology
D. Pick-to-clear location C. Database
Answer: (B) D. Information system
Answer: (B)
27. The expense of shifting the packed orders
into vehicles that would ship them is known as 33. The term used to denote a stacked 2D
___. symbology is ___.
A. Shipping cost A. Determinant
B. Packing cost B. Group
C. Loading cost C. Matrix
D. Picking cost D. Barcode list
Answer: (C) Answer: (C)

28. Distribution centers act as ___ storehouses 34. Which of the following code sets include
of an organization. all standard alphanumeric keyboard
A. Delivery characters along with lower case alpha and
B. Regional special characters?
C. National A. Code set A
D. Procurement B. Code set B
Answer: (B) C. Code set C
D. Code set D
Answer: (B)
29. The company should be prepared for any
future demand from the customer by storing
the ___ in the distribution centers. 35. The most common symbologies are Code
A. Delivery stock 39, ___, and UPC.
B. Strategic stock A. Code 25
C. Safety stock B. Code 93
D. Overhead stock C. Code 128
Answer: (C) D. Code 11
Answer: (C)
30. Which among the following systems deals
with defining a well-defined process or 36. Which of the following uses the CCD
procedure to manage distribution? technology?
A. Cell phone cameras C. 1-True, 2-False
B. Pen type readers D. 1-False, 2-True
C. Laser scanners Answer: (A)
D. Video camera readers
Answer: (D)
42. The objective of maximizing ___ conflicts
with minimizing ___ in inventory.
37. By finding out the number of times a A. Purchase, investment
company places orders one can calculate its B. Production, cost-efficiency
___. C. Profit, negative cash flow
A. Min-max system D. Storage capacity, loss
B. Product demand Answer: (A)
C. Evaluation phase
D. Review cycle
43. Assume that you are responsible for
Answer: (D)
managing inventory in your organization. As a
result of an increase in the demand for your
38. By knowing the ___, a company would company’s products, you have purchased lots
know the cost of items that have to be refilled of inventory at a time. On what basis will you
or added to inventory. categorize the huge inventory accumulated in
A. Selling cost your firm?
B. Buying cost 1. Based on the source of demand
C. Replenishment cost 2. Based on the position of inventory
D. Differentiation cost 3. Based on the size of the inventory
Answer: (C) 4. Based on the function of inventory
A. 1, 2 & 4
B. 1, 3 & 2
39. Which among the following is a
C. 2, 3 & 4
computerized system that controls the kind of
D. 1, 2, 3 & 4
items to be purchased and also decides on the
Answer: (A)
quantity that needs to be purchased?
A. Order point system
B. Material Requirements Planning 44. State True or False:
C. Time Phased Order Point 1. Examples of MRO goods are oils,
D. Enterprise Resource Planning lubricants, coolants, packing material, tools,
Answer: (B) nuts, bolts, and screws.
2. Higher the buffer inventory better is the
customer service.
40. Identify the measure taken to deal with
A. 1-False, 2-False
the issues relating to not having the right item
B. 1-True, 2-False
at the right place at the right time.
C. 1-True, 2-True
A. Increase on-hand safety stock
D. 1-False, 2-True
B. Increase the inventory stock
Answer: (C)
C. Decrease the inventory stock
D. Decrease the safety stock
Answer: (A) 45. State True or False
1. Time-based ordering model involves
greater risk.
41. State True or False:
2. Time based ordering model has the
1. Raw materials can be produced and
possibility of inventory running out before its
extracted by a firm or can be purchased from
review is complete.
outside the firm.
A. 1-False, 2-True
2. Work in-process items are the inventory
B. 1-False, 2-False
items that are not ready to be used by the
C. 1-True, 2-False
customer.
D. 1-True, 2-True
A. 1-True, 2-True
Answer: (D)
B. 1-False, 2-False
46. State True or False B. Quality cost, setup cost
1. While drawing strategies to develop C. Annual usage, carrying cost
efficient logistics for a company, the manager D. Quality cost, annual usage
has to focus on capital reduction and cost Answer: (C)
reduction objectives.
2. The selection of means of transportation
52. State True or False
depends on the location of the customer and
1. Safety stock can be set in weeks or units of
the time within which the product has to be
stock at the simplest level.
delivered to the customer.
2. The larger the lot size, the fewer is the
A. 1-True, 2-False
number of lots required, and hence higher is
B. 1-False, 2-True
the annual set-up cost.
C. 1-True, 2-True
A. 1-False, 2-True
D. 1-False, 2-False
B. 1-True, 2-True
Answer: (C)
C. 1-True, 2-False
D. 1-False, 2-False
47. The time period between placing two Answer: (C)
successive orders is called ___ and the time
period between ordering an item for
53. Which of the following are the factors to
replenishment and actually receiving the item
be considered while calculating safety stock?
into the inventory is called ___.
A. Adjusted service level, annual usage
A. Lead time, order cycle
B. Ordering period, cycle time
B. Order cycle, lead time
C. Cycle time, forecast error
C. OTC cycle, idle time
D. Forecast error desired service level
D. Idle time, OTC cycle
Answer: (D)
Answer: (B)

54. Identify the two ways used to measure the

48. Reorder point = ___ + ___
service level.
A. Lead time demand, safety stock
A. Unit Service Level (USL), Demand Service
B. Forecasted daily unit sale, lead time
Level (DSL)
C. Reorder point, lead time demand
B. Order Service Level (OSL), Unit Service
D. Safety level of stock, demand per day
Level (USL)
Answer: (A)
C. Order Service Level (OSL), Demand
Service Level (DSL)
49. Inventory carrying costs consists of ___ D. Production Service Level (PSL), Unit
and ___. Service Level (USL)
A. Shipping cost, storage cost Answer: (B)
B. Handling cost, storage space cost
C. Vendor cost, physical management cost
55. State True or False
D. Storage cost, physical management cost
1. LILO tracking is the preferred approach for
Answer: (D)
tracking items with a short shelf life as
pickers usually access the oldest items first
50. Which of the following are the factors that without any need for computer tracking.
determine inventory levels? 2. Executives and shareholders need to fully
A. Vendor delivery and storage cost understand supply chain implications to keep
B. Item perishability and storage capacity track of the inventory levels.
C. Spoilage and cost of tracking inventory A. 1-True, 2-False
D. Item cost and vendor delivery B. 1-False, 2-True
Answer: (B) C. 1-True, 2-True
D. 1-False, 2-False
Answer: (B)
51. Identify the two components that make up
the EOQ equation.
A. Order cost, setup cost
56. Which of the following are the methods B. 1-False, 2-True
used to treat the obsolete stock? C. 1-False, 2-False
A. Create a Materials Review Board (MRB), D. 1-True, 2-True
track the rework status actively Answer: (D)
B. Specific identification, track work status
actively
61. Which software is recommended for doing
C. Track work status actively, create a
inventory management?
Material Check Board (MCB)
A. Excel Spreadsheet
D. Track purchase order, create a Materials
B. Proest
Review Board (MRB), and Track the rework
C. Microsoft Word
status actively
D. Photoshop
Answer: (A)
Answer: (B) Proest

57. Inventory turnover ratio = ___ / ___.

62. Which of the following is true for
A. Beginning inventory, total goods sold
inventory control?
B. Average inventory at cost, ending inventory
A. It is only relevant for small businesses
C. Cost of goods sold, average inventory at
B. It helps in minimizing costs related to
cost
overstocking
D. Total goods sold, cost of goods sold
C. It is solely focused on increasing stock
Answer: (C)
levels
D. It has no impact on operational efficiency
58. Which among the following are the Answer: (B) It helps in minimizing costs
overhead activities used to produce related to overstocking
snowmobiles and riding mowers?
A. Admission, pathological testing
63. Proest is used for different management
B. Dietary and laundry, engineering changes,
tasks such as asset inventory.
and quality-control inspections
A. True
C. Engineering changes, quality-control
B. False
inspections
Answer: (A) True
D. Radiological testing, quality-control
inspections
Answer: (C) 64. Which of the following is not an inventory?
A. Raw Materials
B. Finished Products
59. State True or False
C. Work-in-Progress
1. Fabrication activity is labour-intensive
D. Material Management
which involves assembling machined pieces
Answer: (D) Material Management
(components or parts) manually into a final
product.
2. When the acid-test and current ratio are
low it indicates that the supplier has a cash
problem.
A. 1-False, 2-False
B. 1-True, 2-True
C. 1-False, 2-True
D. 1-True, 2-False
Answer: (C)

60. State True or False

1. All barcode readers consist of decoder
circuitry.
2. The sensors present in the scanner provide
the barcode’s image data to the circuitry.
A. 1-True, 2-False