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

Operations and Supply Chain Management MCQs

  

 

1. 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.   $160,000 is released
   2.   $60,000 is released.
   3.   $60,000 is additionally invested.
   4.   $100,000 is additionally invested.
2. 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.   73 days and $120,000.
   3.   73 days and $108,000.
   4.   81 days and $108,000.
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.   129,600 units
   2.   2,592 units
   3.   25,920 units
   4.   18,720 units
4. Costs of not carrying enough inventory include:
   1.   lost sales.
   2.   possible worker layoffs.
   3.   customer disappointment.
   4.   all of these.
5. Which of the following relationships hold true for safety stock?
   1.   the greater the risk of running out of stock, the smaller the safety of stock.
   2.   the higher the profit margin per unit, the higher the safety stock necessary.
   3.   the greater the uncertainty associated with forecasted demand, the smaller the safety stock.
   4.   the larger the opportunity cost of the funds invested in inventory, the larger the safety stock.
6. 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.   an increase in the average collection period.
   2.   higher profits.
   3.   an increase in sales.
   4.   a decrease in bad debt losses.
7. 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.   No change from the present level.
   3.   Higher than the present level.
   4.   Unable to determine without more information.
8. An increase in the firm's receivable turnover ratio means that:
   1.   it is collecting credit sales more quickly than before.
   2.   cash sales have decreased.
   3.   it has initiated more liberal credit terms.
   4.   inventories have increased.
9. Receiving a required inventory item at the exact time needed.
   1.   ABC
   2.   JIT
   3.   FOB
   4.   PERT
10. EOQ is the order quantity that over our planning horizon
    1.   minimizes total ordering costs
    2.   the required safety stock
    3.   minimizes total inventory costs
    4.   minimizes total carrying costs
11. 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.   $160,000 is released
    2.   $60,000 is released
    3.   $60,000 is additionally invested
    4.   $100,000 is additionally invested
12. 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.   81 days and $108,000
    2.   73 days and $108,000
    3.   73 days and $120,000
    4.   81 days and $120,000
13. 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.   80 units.
    3.   16 units.
    4.   40 units
14. 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.   $2
    2.   $1000
    3.   $100
    4.   $10
15. Which of the following statements hold true for safety stock?
    1.   The greater the risk of running out of stock, the larger the safety stock needed.
    2.   The higher the profit margin per unit, the lower the safety stock necessary.
    3.   The greater the uncertainty associated with forecasted demand, the lower the level of safety stock needed.
    4.   The lower the opportunity cost of the funds invested in inventory, the smaller the safety stock needed.
16. Which ratio might you be the most concerned with in analyzing a firm's financial leverage position?
    1.   Return on equity.
    2.   Inventory turnover.
    3.   Acid-test.
    4.   Debt-to-total assets.
17. 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.   Account receivable would be lower than the present level.
    2.   Unable to determine without more information.
    3.   Account receivable would be higher than the present level.
    4.   No change from the present level.
18. A decrease in the firm's receivable turnover ratio means that __________.
    1.   it is collecting credit sales more quickly than before
    2.   Sales have gone down
    3.   inventories have gone up
    4.   it is collecting credit sales more slowly than before
19. 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 (Q/2) + O (S/Q)
    2.   T = SQRT [ 2 (O) (S) / C ]
    3.   T = C (S/Q) + O (Q/2)
    4.   T = SQRT [ 2 (C) (S) / O ]
20. Which of the following statements is most correct about inventory management?
    1.   EOQ occurs where total carrying costs (TCC) plus total ordering costs (TOC) is minimized.
    2.   For most firms, inventory management is simply the result of ordering what the plant manager requests to
       maximize the output per shift.
    3.   The JIT system where inventories are reduced to a bare minimum is at odds with the inventory EOQ model.
    4.   The order point can be expressed as the average lead time multiplied by average daily usage and then, minus
       the necessary safety stock.