Inventory Management MCQs Quiz Multiple Choice Questions & Answers

1. Which of the following is true for Inventory control?

1. Economic order quantity has minimum total cost per order
2. Inventory carrying costs increases with quantity per order
3. Ordering cost decreases with lo size
4. All of the above

2. Which of the following is true for Inventory control?

1. Economic order quantity has minimum total cost per order
2. Inventory carrying costs increases with quantity per order
3. Ordering cost decreases with lo size
4. All of the above

3. Which product is usually bought on a fixed interval basis?

1. textbooks
2. wedding gifts
3. sugar
4. brownies

4. Which product is usually bought on an ROP basis?

1. textbooks
2. wedding gifts
3. sugar
4. newspaper

5. A fixed-interval ordering system would be used for items that have independent demand.

1. true.
2. false.

6. A store that sells daily newspapers could use the single-period model for reordering.

1. true.
2. false.

7. A two-bin system is essentially a simple reorder point system.

1. true.
2. false.

8. Average stock level can be calculated as

1. Minimum stock level + ½ of Re-order level
2. Maximum stock level + ½ of Re-order level
3. Minimum stock level + 1/3 of Re-order level
4. Maximum stock level + 1/3 of Re-order level

9. Holding and ordering costs are inversely related to each other.

1. true.
2. false.

10. If a decrease in unit price causes the average demand rate to increase, which one of these would not increase?

1. the EOQ
2. lead time
3. annual holding cost
4. the ROP

11. If average demand for an item is 21 units per day, safety stock is 4 units, and lead time is 2 days, the ROP will be:

1. 84
2. 46
3. 42
4. none of these

12. In an A-B-C system, B items typically represent about this percentage of items:

1. 90%
2. 75%
3. 50%
4. 30%

13. In the basic EOQ model, annual ordering cost and annual ordering cost are equal for the optimal order quantity.

1. true.
2. false.

14. In the two-bin system, the quantity in the second bin is equal to the:

1. EOQ
2. ROP
3. FOI
4. None of these

15. Increasing the order quantity so that it is slightly above the EOQ would not increase the total cost by very much.

1. true.
2. false.

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. order size
2. order frequency
3. reorder point

18. Re-ordering level is calculated as

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

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

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

20. The cost of insurance and taxes are included in

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

21. The cost of insurance and taxes are included in

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

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

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

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

25. The minimum stock level is calculated as

1. Reorder level - (Nornal consumption x Normal delivery time)
2. Reorder level + (Nornal consumption x Normal delivery time)
3. (Reorder level + Nornal consumption) x Normal delivery time
4. (Reorder level + Nornal consumption) / 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 x Normal delivery time)
3. (Reorder level + Nornal consumption) x Normal delivery time
4. (Reorder level + Nornal consumption) / 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. 400
2. 440
3. 480
4. 500

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

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

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

1. true.
2. false.

31. Use of the fixed-interval model requires having a perpetual inventory system.

1. true.
2. false.

32. Using the basic EOQ model, if the ordering cost doubles, the order quantity will be

1. double its former value
2. about 50% of its former value
3. about 71% of its former value
4. unaffected

33. Using the EOQ model, if an items holding cost increases, its order quantity will decrease.

1. true.
2. false.

34. When using EOQ ordering, the order quantity must be computed in every order cycle.

1. true.
2. false.

35. Which model does not take into account the amount of inventory on hand?

1. FOI
2. ROP
3. EOQ

36. Which of the following is not an inventory?

1. Machines
2. Raw material
3. Finished products
4. Consumable tools

37. Which of the following is not an inventory?

1. Machines
2. Raw material
3. Finished products
4. Consumable tools

38. Buffer stock is the level of stock

1. Half of the actual stock
2. At which the ordering process should start
3. Minimum stock level below which actual stock should not fall
4. Maximum stock in inventory