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SCMA 331 Final Chapter 12 UPDATED Exam Questions and CORRECT Answers
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SCMA 331 Final Chapter 12 UPDATED Exam Questions and CORRECT Answers According to the global company profile, A's advantage in inventory management comes from its almost fanatical use of economic order quantity and safety stock calculations. - CORRECT ANSWER- False A major challenge in inve...

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  • September 15, 2024
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  • 2024/2025
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SCMA 331 Final Chapter 12 UPDATED
Exam Questions and CORRECT Answers
According to the global company profile, Amazon.com's advantage in inventory management
comes from its almost fanatical use of economic order quantity and safety stock calculations.
- CORRECT ANSWER- ✔✔False


A major challenge in inventory management is to maintain a balance between inventory
investment and customer service. - CORRECT ANSWER- ✔✔True


Which item to order and with which supplier the order should be placed are the two
fundamental issues in inventory management. - CORRECT ANSWER- ✔✔False


One function of inventory is to take advantage of quantity discounts. - CORRECT
ANSWER- ✔✔True


Work-in-process inventory is devoted to maintenance, repair, and operating materials. -
CORRECT ANSWER- ✔✔False


Which of the following statements regarding Amazon.com is FALSE?
A) The company was opened by Jeff Bezos in 1995.
B) The company was founded as, and still is, a "virtual" retailer with no inventory.
C) The company is now a world-class leader in warehouse automation and management.
D) The company uses both United Parcel Service and the U.S. Postal Service as shippers.
E) Amazon obtains its competitive advantage through inventory management. - CORRECT
ANSWER- ✔✔B


Which of the following is a function of inventory?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm
from fluctuations in that demand
C) to take advantage of quantity discounts
D) to hedge against inflation

,E) All of the above are functions of inventory - CORRECT ANSWER- ✔✔E


Which of the following would NOT generally be a motive for a firm to hold inventories?
A) to decouple various parts of the production process
B) to provide a selection of goods for anticipated customer demand and to separate the firm
from fluctuations in that demand
C) to take advantage of quantity discounts
D) to minimize holding costs

E) to hedge against inflation - CORRECT ANSWER- ✔✔D


Which of the following is NOT one of the four main types of inventory?
A) raw material inventory
B) work-in-process inventory
C) maintenance/repair/operating supply inventory
D) safety stock inventory

E) finished-goods inventory - CORRECT ANSWER- ✔✔D


Amazon's original concept of operating without inventory has given way to a model in which
Amazon is a world-class leader in ________. - CORRECT ANSWER- ✔✔warehouse
automation and management


Inventory that separates various parts of the production process performs a(n) ________
function. - CORRECT ANSWER- ✔✔decoupling


________ inventory is material that is usually purchased, but has yet to enter the
manufacturing process. - CORRECT ANSWER- ✔✔Raw material


Explain what "decoupling" means in the context of inventory management. - CORRECT
ANSWER- ✔✔Decoupling means to separate various parts of the production process. Each
of the parts can then function at its own best pace.

,What are the four functions of inventory? - CORRECT ANSWER- ✔✔(1) to provide a
selection of goods for anticipated customer demand and to separate the firm from fluctuations
in that demand; (2) to decouple various parts of the production process; (3) to take advantage
of quantity discounts; and (4) to hedge against inflation


Identify the four types of inventory. - CORRECT ANSWER- ✔✔(1) raw material inventory;
(2) work-in-process inventory; (3) maintenance/repair/operating supply (MRO) inventory;
and (4) finished-goods inventory


What is MRO an acronym for? What is the function of MRO inventories? - CORRECT
ANSWER- ✔✔MRO inventories are devoted to maintenance/repair/operating supplies. They
exist because the need and timing for maintenance and repair of some equipment are
unknown.


ABC analysis classifies inventoried items into three groups, usually based on annual units or
quantities used. - CORRECT ANSWER- ✔✔False



In ABC analysis, "A" items are the most tightly controlled. - CORRECT ANSWER- ✔✔True


ABC analysis is based on the presumption that carefully controlling all items is necessary to
produce important inventory savings. - CORRECT ANSWER- ✔✔False


Cycle counting is an inventory control technique exclusively used for cyclical items. -
CORRECT ANSWER- ✔✔False


One advantage of cycle counting is that it maintains accurate inventory records. - CORRECT
ANSWER- ✔✔True


In cycle counting, the frequency of item counting and stock verification usually varies from
item to item depending upon the item's classification. - CORRECT ANSWER- ✔✔True


Retail inventory that is unaccounted for between receipt and time of sale is known as
shrinkage. - CORRECT ANSWER- ✔✔True

, Which of the following statements about ABC analysis is FALSE?
A) ABC analysis is based on the presumption that controlling the few most important items
produces the vast majority of inventory savings.
B) In ABC analysis, "A" items should have tighter physical inventory control than "B" or "C"
items have.
C) In ABC analysis, forecasting methods for "C" items may be less sophisticated than for "A"
items.
D) ABC analysis is based on the presumption that all items must be tightly controlled to
produce important cost savings.
E) Criteria other than annual dollar volume, such as high holding cost or delivery problems,
can determine item classification in ABC analysis. - CORRECT ANSWER- ✔✔D


All EXCEPT which of the following statements about ABC analysis are true?
A) In ABC analysis, inventory may be categorized by measures other than dollar volume.
B) ABC analysis categorizes on-hand inventory into three groups based on annual dollar
volume.
C) ABC analysis is an application of the Pareto principle.
D) ABC analysis suggests that all items require the same high degree of control.
E) ABC analysis suggests that there are the critical few and the trivial many inventory items.
- CORRECT ANSWER- ✔✔D


ABC analysis is based upon the principle that:
A) all items in inventory must be monitored very closely.
B) there are usually a few critical items, and many items that are less critical.
C) an item is critical if its usage is high.
D) more time should be spent on class "C" items because there are many more of them.
E) as with grade distributions in many MBA courses, there should be more medium-level "B"
items than either "A" or "C" items. - CORRECT ANSWER- ✔✔B


ABC analysis divides on-hand inventory into three classes, generally based upon which of the
following?
A) item quality
B) unit price

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