Question 1

Which of the following statements about ABC analysis is false?

• ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings.

• In ABC analysis, A items are tightly controlled, have accurate records, and receive regular review by major decision makers.

• In ABC analysis, C items have minimal records, periodic review, and simple controls.

• ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.

• All of the above

Question 2

ABC analysis divides on-hand inventory into three classes, generally based upon

• item quality.

• unit price.

• the number of units on hand.

• annual demand.

• annual dollar volume.

Question 3

Which of the following is an element of inventory holding costs?

• Housing costs

• Material handling costs

• Investment costs

• Pilferage, scrap, and obsolescence

• All of the above

Question 4

A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity?

• 16

• 70

• 110

• 183

• 600

Question 5

The purpose of safety stock is to

• replace failed units with good ones.

• eliminate the possibility of a stockout.

• eliminate the likelihood of a stockout because of erroneous inventory tally.

• control the likelihood of a stockout because of the variability of demand during lead time.

• protect the firm from a sudden decrease in demand.

Question 6

Effective use of MRP and other dependent demand models does not require which of the following?

• Master production schedule

• Bill of materials

• Inventory availability

• Lead times

• Cost of individual components

Question 7

A master production schedule specifies

• the raw materials required to complete the product.

• what component is to be made and when.

• what product is to be made and when.

• the labor hours required for production.

• the financial resources required for production.

Question 8

A document calls for the production of 50 small garden tractors in week 1; 50 small garden tractors and 100 riding mowers in week 2; 100 riding mowers and 200 garden utility carts in week 3; and 100 riding mowers in week 4. This document is most likely a(n)

• net requirements document.

• resource requirements profile.

• aggregate plan.

• master production schedule.

• Wagner-Whitin finite capacity document.

Question 9

A bill of material lists the

• times needed to perform all phases of production.

• production schedules for all products.

• components, ingredients, and materials required to produce an item.

• operations required to produce an item.

• components, ingredients, materials, and assembly operations required to produce an item.

Question 10

The bill of material contains information necessary to

• place an order to replenish the item.

• calculate quantities on hand and on order.

• convert net requirements into higher level gross requirements.

• convert gross requirements into net requirements.

• convert (explode) net requirements at one level into gross requirements at the next level.