Multiple Choice Questions and Answer on Inventory Control Management PDF
1. Sixty percent of Basket Wonders’ annual sales of $900,000 is on credit. If its year-endreceivables turnover is 4.5, the average collection period and the year-end receivables are,respectively __________. (Assume a 365-day year.)
A) 81 days and $120,000
B) 73 days and $120,000
C) 73 days and $108,000
D) 81 days and $108,000
2. If EOQ = 40 units, order costs are $2 per order, and carrying costs are $.20 per unit, what is theusage in units?
A) 10 units.
B) 16 units.
C) 40 units.
D) 80 units.
3. If EOQ = 1,000 units, order costs are $200 per order, and sales total 5,000 units, what is thecarrying cost per unit?
4. Which of the following statements hold true for safety stock?
A) The greater the risk of running out of stock, the larger the safety stock needed.
B) The lower the opportunity cost of the funds invested in inventory, the smaller the safety stockneeded.
C) The greater the uncertainty associated with forecasted demand, the lower the level of safety stockneeded.
D) The higher the profit margin per unit, the lower the safety stock necessary.
5. Which ratio might you be the most concerned with in analyzing a firm’s financial leverageposition?
A) Return on equity.
B) Debt-to-total assets.
D) Inventory turnover.
6. Which of the following relationships hold true for safety stock?
A) the greater the risk of running out of stock, the smaller the safety of stock.
B) the larger the opportunity cost of the funds invested in inventory, the larger the safety stock.
C) the greater the uncertainty associated with forecasted demand, the smaller the safety stock.
D) the higher the profit margin per unit, the higher the safety stock necessary.
7. 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:
A) an increase in the average collection period.
B) a decrease in bad debt losses.
C) an increase in sales.
D) higher profits.
8. Receiving a required inventory item at the exact time needed.
9. EOQ is the order quantity that over our planning horizon.
A) minimizes total ordering costs
B) minimizes total carrying costs
C) minimizes total inventory costs
D) the required safety stock
10. The credit policy of Spurling Products is “1.5/10, net 35.” At present 30% of the customers take thediscount, 62% pay within the net period, and the rest pay within
45 days of invoice. What wouldreceivables be if all customers took the cash discount?
A) Lower than the present level.
B) No change from the present level.
C) Higher than the present level.
D) Unable to determine without more information.
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