Inventory Management Multiple Choice Questions and Answers for Practice

16. Inventory might be held to take advantage of order cycles.

1. true.
2. false.

17. Other things beings equal, an increase in lead time for inventory orders will result in an increase in the:

1. reorder point
2. order size
3. order frequency

18. Re-ordering level is calculated as

1. Maximum consumption rate x Minimum re-order period
2. Minimum consumption rate x Maximum re-order period
3. Maximum consumption rate x Maximum re-order period
4. Minimum consumption rate x Minimum re-order period

19. Setup costs are analogous to which one of these costs?

1. excess
2. ordering
3. shortage
4. holding

20. The cost of insurance and taxes are included in

1. Inventory carrying cost
2. Cost of shortages
3. Cost of ordering
4. Set up cost

21. The cost of insurance and taxes are included in

1. Inventory carrying cost
2. Cost of shortages
3. Cost of ordering
4. Set up cost

22. The economic order quantity cannot be used when holding costs are a percentage of purchase cost.

1. true.
2. false.

23. The following classes of costs are usually involved in inventory decisions except

1. Cost of shortages
2. Machining cost
3. Cost of ordering
4. Carrying cost

24. The following classes of costs are usually involved in inventory decisions except

1. Cost of shortages
2. Machining cost
3. Cost of ordering
4. Carrying cost

25. The minimum stock level is calculated as

1. (Reorder level + Nornal consumption) x Normal delivery time
2. (Reorder level + Nornal consumption) / Normal delivery time
3. Reorder level - (Nornal consumption x Normal delivery time)
4. Reorder level + (Nornal consumption x Normal delivery time)

26. The minimum stock level is calculated as

1. (Reorder level + Nornal consumption) x Normal delivery time
2. (Reorder level + Nornal consumption) / Normal delivery time
3. Reorder level – (Nornal consumption x Normal delivery time)
4. Reorder level + (Nornal consumption x Normal delivery time)

27. The objective of inventory management is to minimize holding costs.

1. true.
2. false.

28. The order cost per order of an inventory is Rs. 400 with an annual carrying cost of Rs. 10 per unit. The Economic Order Quantity (EOQ) for an annual demand of 2000 units is

1. 480
2. 500
3. 400
4. 440

29. The time period between placing an order its receipt in stock is known as

1. Shortage time
2. Over time
3. Lead time
4. Carrying time

30. The two basic questions in inventory management are how much to order and when to order.

1. true.
2. false.