Operations & Supply Chain Management | Chapter 4 | Part 2 | MBA MCQs | OSM

Operations and Supply Chain Management MCQs

  

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1. EOQ is the order quantity that over our planning horizon
   1.   minimizes total ordering costs
   2.   minimizes total inventory costs
   3.   the required safety stock
   4.   minimizes total carrying costs
2. A decrease in the firm's receivable turnover ratio means that __________.
   1.   it is collecting credit sales more slowly than before
   2.   Sales have gone down
   3.   it is collecting credit sales more quickly than before
   4.   inventories have gone up
3. If EOQ = 360 units, order costs are $5 per order, and carrying costs are $.20 per unit, what is the usage in
   units?
   1.   2,592 units
   2.   25,920 units
   3.   18,720 units
   4.   129,600 units
4. firm's inventory turnover (IT) is 5 times on a cost of goods sold (COGS) of $800,000. If the IT is improved
   to 8 times while the COGS remains the same, a substantial amount of funds is released from or additionally
   invested in inventory. In fact,
   1.   $60,000 is additionally invested.
   2.   $160,000 is released
   3.   $60,000 is released.
   4.   $100,000 is additionally invested.
5. Which of the following best represents the total inventory costs, T, where S is total usage of the inventory
   item for the period, Q is the quantity, O is cost per order, and C is carrying costs per unit for the period?
   1.   T = C (S/Q) + O (Q/2)
   2.   T = SQRT [ 2 (O) (S) / C ]
   3.   T= C (Q/2) + O (S/Q)
   4.   T = SQRT [ 2 (C) (S) / O ]
6. Receiving a required inventory item at the exact time needed.
   1.   FOB
   2.   JIT
   3.   PERT
   4.   ABC
7. A firm's inventory turnover (IT) is 8 times on a cost of goods sold (COGS) of $800,000. If the IT changes to
   5 times while the COGS remains the same, a substantial amount of funds is either released from or additionally
   invested in inventory. In fact, __________.
   1.   $100,000 is additionally invested
   2.   $160,000 is released
   3.   $60,000 is released
   4.   $60,000 is additionally invested
8. The credit policy of Spurling Products is "1.5/10, net 35." At present 30% of the customers take the discount,
   62% pay within the net period, and the rest pay within 45 days of invoice. What would receivables be if all
   customers took the cash discount?
   1.   Lower than the present level.
   2.   Higher than the present level.
   3.   No change from the present level.
   4.   Unable to determine without more information.
9. Which of the following relationships hold true for safety stock?
   1.   the higher the profit margin per unit, the higher the safety stock necessary.
   2.   the greater the uncertainty associated with forecasted demand, the smaller the safety stock.
   3.   the greater the risk of running out of stock, the smaller the safety of stock.
   4.   the larger the opportunity cost of the funds invested in inventory, the larger the safety stock.
10. An increase in the firm's receivable turnover ratio means that:
    1.   it is collecting credit sales more quickly than before.
    2.   inventories have increased.
    3.   cash sales have decreased.
    4.   it has initiated more liberal credit terms.
11. If EOQ = 1,000 units, order costs are $200 per order, and sales total 5,000 units, what is the carrying cost per
    unit?
    1.   $100
    2.   $1000
    3.   $10
    4.   $2
12. Which ratio might you be the most concerned with in analyzing a firm's financial leverage position?
    1.   Debt-to-total assets.
    2.   Acid-test.
    3.   Inventory turnover.
    4.   Return on equity.
13. Costs of not carrying enough inventory include:
    1.   lost sales.
    2.   possible worker layoffs.
    3.   all of these.
    4.   customer disappointment.
14. Which of the following statements is most correct about inventory management?
    1.   The order point can be expressed as the average lead time multiplied by average daily usage and then, minus
       the necessary safety stock.
    2.   The JIT system where inventories are reduced to a bare minimum is at odds with the inventory EOQ model.
    3.   For most firms, inventory management is simply the result of ordering what the plant manager requests to
       maximize the output per shift.
    4.   EOQ occurs where total carrying costs (TCC) plus total ordering costs (TOC) is minimized.
15. Ninety-percent of Vogel Bird Seed's total sales of $600,000 is on credit. If its year-end receivables turnover
    is 5, the average collection period (based on a 365-day year) and the year-end receivables are, respectively
    1.   365 days and $108,000.
    2.   81 days and $108,000.
    3.   73 days and $120,000.
    4.   73 days and $108,000.
16. Sixty percent of Basket Wonders' annual sales of $900,000 is on credit. If its year-end receivables turnover is
    4.5, the average collection period and the year-end receivables are, respectively __________. (Assume a 365-
    day year.)
    1.   73 days and $120,000
    2.   81 days and $120,000
    3.   81 days and $108,000
    4.   73 days and $108,000
17. Which of the following statements hold true for safety stock?
    1.   The lower the opportunity cost of the funds invested in inventory, the smaller the safety stock needed.
    2.   The higher the profit margin per unit, the lower the safety stock necessary.
    3.   The greater the risk of running out of stock, the larger the safety stock needed.
    4.   The greater the uncertainty associated with forecasted demand, the lower the level of safety stock needed.
18. If EOQ = 40 units, order costs are $2 per order, and carrying costs are $.20 per unit, what is the usage in units?
    1.   10 units.
    2.   16 units.
    3.   80 units.
    4.   40 units
19. Increasing the credit period from 30 to 60 days, in response to a similar action taken by all of our competitors,
    would likely result in:
    1.   a decrease in bad debt losses.
    2.   an increase in sales.
    3.   an increase in the average collection period.
    4.   higher profits.
20. The credit policy of Milwaukee Brewski Breweries is 1/10, net 30. At present 25% of the customers take the
    discount. What would accounts receivable be if all customers took the cash discount?
    1.   Unable to determine without more information.
    2.   Account receivable would be higher than the present level.
    3.   No change from the present level.
    4.   Account receivable would be lower than the present level.