What is the primary goal of inventory management?
a) To increase inventory levels
b) To reduce production costs
c) To balance inventory levels to meet customer demand while minimizing carrying costs
d) To enhance supplier relationships Answer: c) To balance inventory levels to meet customer demand while minimizing carrying costs
Which of the following is NOT a type of inventory?
a) Raw materials
b) Work-in-progress (WIP)
c) Finished goods
d) Marketing materials Answer: d) Marketing materials
What does the term “Safety Stock” refer to in inventory management?
a) Extra inventory kept to prevent stockouts due to demand variability or supply delays
b) Inventory that is on promotion
c) Inventory that is obsolete
d) Inventory stored in a secure warehouse Answer: a) Extra inventory kept to prevent stockouts due to demand variability or supply delays
Which inventory management technique involves ordering inventory when it reaches a predetermined level?
a) Economic Order Quantity (EOQ)
b) Just-In-Time (JIT)
c) Reorder Point
d) ABC Analysis Answer: c) Reorder Point
What does the Economic Order Quantity (EOQ) model aim to determine?
a) The optimal number of units to order to minimize total inventory costs
b) The ideal reorder point for inventory
c) The level of safety stock required
d) The maximum allowable stock level Answer: a) The optimal number of units to order to minimize total inventory costs
Which of the following is a key benefit of Just-In-Time (JIT) inventory management?
a) Increased inventory holding costs
b) Reduced lead times and inventory levels
c) Higher stock levels
d) Increased safety stock Answer: b) Reduced lead times and inventory levels
What is the purpose of “ABC Analysis” in inventory management?
a) To categorize inventory based on its importance and value to prioritize management efforts
b) To determine the economic order quantity
c) To calculate safety stock levels
d) To identify the reorder point Answer: a) To categorize inventory based on its importance and value to prioritize management efforts
In inventory management, what does “Cycle Counting” involve?
a) Counting all inventory items once a year
b) Periodically counting a subset of inventory items to ensure accuracy
c) Counting inventory during peak seasons only
d) Counting inventory at the end of each financial quarter Answer: b) Periodically counting a subset of inventory items to ensure accuracy
Which of the following is NOT a method for controlling inventory levels?
a) Periodic Review System
b) Continuous Review System
c) Safety Stock Management
d) Demand Forecasting Answer: d) Demand Forecasting
What is the primary objective of “Demand Forecasting” in inventory management?
a) To determine the optimal reorder point
b) To predict future demand to plan inventory levels accurately
c) To calculate safety stock requirements
d) To evaluate supplier performance Answer: b) To predict future demand to plan inventory levels accurately
Which inventory model focuses on minimizing the total cost of ordering and holding inventory?
a) ABC Analysis
b) EOQ (Economic Order Quantity)
c) JIT (Just-In-Time)
d) MRP (Material Requirements Planning) Answer: b) EOQ (Economic Order Quantity)
What does the “Carrying Cost” of inventory include?
a) Costs related to ordering and replenishing inventory
b) Costs associated with holding and storing inventory, including warehousing and obsolescence
c) Costs of manufacturing inventory
d) Costs of marketing inventory Answer: b) Costs associated with holding and storing inventory, including warehousing and obsolescence
In inventory management, what does “Lead Time” refer to?
a) The time required to transport inventory from the supplier to the warehouse
b) The time between placing an order and receiving the inventory
c) The time needed to sell inventory
d) The time required to process customer orders Answer: b) The time between placing an order and receiving the inventory
Which inventory system involves ordering inventory at regular intervals?
a) Continuous Review System
b) Periodic Review System
c) JIT (Just-In-Time)
d) EOQ (Economic Order Quantity) Answer: b) Periodic Review System
What is the primary function of “Inventory Turnover Ratio”?
a) To measure the rate at which inventory is sold and replaced over a period
b) To determine the optimal reorder point
c) To calculate the safety stock level
d) To assess the carrying cost of inventory Answer: a) To measure the rate at which inventory is sold and replaced over a period
Which of the following inventory management methods helps in minimizing excess inventory?
a) Just-In-Time (JIT)
b) EOQ (Economic Order Quantity)
c) ABC Analysis
d) Cycle Counting Answer: a) Just-In-Time (JIT)
What does the term “Stockout” refer to in inventory management?
a) Having excess inventory on hand
b) Running out of stock and being unable to meet customer demand
c) The process of selling off old inventory
d) The cost of holding excess inventory Answer: b) Running out of stock and being unable to meet customer demand
Which inventory management technique is used to balance the costs of ordering and holding inventory?
a) EOQ (Economic Order Quantity)
b) JIT (Just-In-Time)
c) Safety Stock
d) ABC Analysis Answer: a) EOQ (Economic Order Quantity)
What role does “Safety Stock” play in inventory management?
a) To increase inventory turnover
b) To provide a buffer against uncertainties in demand and supply
c) To reduce the cost of inventory storage
d) To eliminate the need for demand forecasting Answer: b) To provide a buffer against uncertainties in demand and supply
What is a “Reorder Point” in inventory management?
a) The maximum inventory level that can be held
b) The inventory level at which a new order should be placed to avoid stockouts
c) The level of safety stock required
d) The point at which inventory is counted Answer: b) The inventory level at which a new order should be placed to avoid stockouts