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22 Cards in this Set
- Front
- Back
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1. Which of the following statements is most accurate about inventory management?
A. Inventories and production must be managed together. B. Inventory is not important at the production planning level. C. Inventories are usually insignificant on the balance sheet. D. Inventory does not cost much to carry. |
A. Inventories and production must be managed together.
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2. What is the name of materials used in the production process that do not become part of the product?
A. Raw materials B. WIP C. Finished goods D. Maintenance, repair, and operating supplies |
D. Maintenance, repair, and operating supplies
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3. What is the name given to inventories of items that are purchased or manufactured in quantities greater than needed immediately?
A. Fluctuation inventory B. Lot-size inventory C. Transportation inventory D. Scheduled receipts |
B. Lot-size inventory
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4. Which of the following company objectives are in conflict?
A. Maximum customer service and low-cost plant operation B. Low-cost plant operation and cash flow C. Maximum inventory investment and customer service D. Cash flow and profitability |
A. Maximum customer service and low-cost plant operation
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5. Which of the following costs will increase if order quantity is increased?
A. Annual cost of carrying inventory B. Cost of ordering C. Cost of manufacturing operations D. Cost of customer service |
A. Annual cost of carrying inventory
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6. Which of the following are costs of carrying inventory?
A. Capital costs and production control costs B. Capital costs and storage costs C. Production control costs and purchase costs D. Storage costs and purchasing costs |
B. Capital costs and storage costs
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7. Which of the following are considered ordering costs?
A. Production control costs B. Capital costs C. Risk costs D. Obsolescence costs |
A. Production control costs
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8. Which of the following equations is correct?
A. Assets = liabilities – owner’s equity B. Income = revenue – liabilities C. Owner’s equity = assets – liabilities D. Revenue = cost of goods sold – general and administrative expenses |
C. Owner’s equity = assets minus liabilities
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9. If the inventory turns ratio is 6 and the average inventory is 2.5 million, what is the annual costs of goods sold?
A. $8.5 million B. $2.4 million C. $12.5 million D. $15 million |
D. $15 million
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10. Which of the following costs is relevant to inventory management decisions?
A. Run costs B. Storage costs C. Marketing costs D. New product development costs |
B. Storage costs
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A financial statement showing the resources owned, the debts owed, and the owner’s share of a company at a given point in time.
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BALANCE SHEET
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An accounting classification useful for determining the amount of direct materials, direct labor, and allocated overhead associated with the products sold during a given period of time.
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COSTS OF GOODS SOLD
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Establishing the overall level (dollar value) of inventory desired.
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AGGREGATE INVENTORY
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Computed by dividing the average inventory level into the annual costs of goods sold.
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INVENTORY TURNS
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A form of inventory buildup to buffer against some event that may not happen.
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HEDGE INVENTORY
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Shows the net income for a business over a given period of time.
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INCOME STATEMENT
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One-half the average lot size plus the safety stock, when demand and lot sizes are expected to be relatively uniform over time.
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AVERAGE INVENTORY
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An accounting or financial term (balance sheet classification of accounts) representing the residual claim by the company’s owners or shareholders, or both, to the company’s assets less its liabilities.
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OWNER’S EQUITY
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The cost of holding inventory, usually defined as a percentage of the dollar value of inventory per unit of time (generally one year).
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CARRYING COSTS
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Inventory that results whenever quantity price discounts, shipping costs, setup costs, or similar considerations make it more economical to purchase or produce in larger lots than are needed for immediate purposes.
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LOT-SIZE INVENTORY
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Additional inventory above basic pipeline stock to cover projected trends of increasing sales, planned sales promotion programs, seasonal fluctuations, plant shutdowns, and vacations.
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ANTICIPATION INVENTORIES
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A statement of on-hand quantities or the dollar value of a stock keeping unit at the end of a period, often determined by a physical inventory.
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ENDING INVENTORY
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