Inventory Management Multiple Choice Questions and Answers

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.