Inventory Control Techniques: Master Inventory Management Strategies

Question 1

Which inventory control technique categorizes inventory items into three groups (A, B, and C) based on their value and usage patterns?

Accepted Answer

ABC analysis

Answer

EOQ models

Answer

Safety stock management

Answer

JIT inventory

Question 2

The primary purpose of safety stock is to:

Accepted Answer

Buffer against demand or supply fluctuations

Answer

Minimize ordering costs

Answer

Increase inventory turnover

Answer

Improve customer satisfaction

Question 3

Inventory control involves balancing:

Accepted Answer

Customer service and inventory costs

Answer

Accuracy and efficiency

Answer

Speed and flexibility

Answer

Quality and price

Question 4

Which inventory system tracks inventory levels in real-time?

Accepted Answer

Perpetual inventory system

Answer

Periodic inventory system

Answer

First-in, first-out (FIFO) system

Answer

Last-in, first-out (LIFO) system

Question 5

Which inventory control technique involves creating smaller inventory units to improve control?

Accepted Answer

Kitting

Answer

Cycle counting

Answer

Cross-docking

Answer

Vendor-managed inventory (VMI)

Question 6

What is the main objective of ABC analysis in inventory management?

Accepted Answer

Classify inventory items based on their annual usage value

Answer

Determine ideal inventory levels for each item

Answer

Compute safety stock levels for each inventory item

Question 7

ABC analysis is primarily used to:

Accepted Answer

Classify inventory items based on their annual usage value

Answer

Determine the reorder point for each inventory item

Answer

Calculate the economic order quantity

Answer

Evaluate the performance of suppliers

Question 8

Which of the following is not a factor considered when calculating the economic order quantity (EOQ)?

Accepted Answer

Safety stock level

Answer

Ordering cost per unit

Answer

Carrying cost per unit per year

Answer

Demand rate

Question 9

The primary purpose of safety stock in inventory management is to:

Accepted Answer

Buffer against demand fluctuations and supply disruptions

Answer

Ensure optimal inventory levels

Answer

Minimize carrying costs

Answer

Eliminate the need for lead time

Question 10

Which inventory tracking system provides real-time updates on inventory levels?

Accepted Answer

Perpetual inventory system

Answer

Periodic inventory system

Answer

Kanban system

Answer

First-in, first-out (FIFO) method

Question 11

The primary distinction between a push and pull inventory system is that:

Accepted Answer

Push systems produce to forecast, while pull systems produce to actual demand

Answer

Pull systems use safety stock, while push systems do not

Answer

Push systems are more efficient for high-volume products, while pull systems are better for low-volume products

Answer

Pull systems require more lead time than push systems

Question 12

Which inventory control metric calculates the average time required for inventory to be sold, reflecting the efficiency of the inventory management system?

Accepted Answer

Inventory Turnover

Answer

Safety Stock

Answer

Economic Order Quantity

Answer

Average Inventory

Question 13

Which inventory control technique categorizes items based on their annual usage value and contribution to business operations?

Accepted Answer

ABC analysis

Answer

Just-in-time (JIT) inventory

Answer

Economic order quantity (EOQ) model

Answer

Safety stock management

Question 14

In the EOQ model, which variable represents the quantity of items to order at each replenishment?

Accepted Answer

Optimal order quantity

Answer

Average inventory level

Answer

Demand rate

Answer

Holding cost per unit per year

Question 15

When determining safety stock levels, which factor is NOT taken into account?

Accepted Answer

Production capacity

Answer

Lead time variability

Answer

Demand variability

Answer

Customer service level

Question 16

What is the primary goal of inventory control techniques?

Accepted Answer

Minimize inventory-related costs while upholding desired service levels

Answer

Maximize inventory levels to prevent stockouts

Answer

Increase production capacity to meet demand

Answer

Improve forecasting accuracy

Question 17

In the context of inventory management, what does the term 'carrying cost' refer to?

Accepted Answer

Costs associated with storing and holding inventory

Answer

Costs incurred during the ordering process

Answer

Costs resulting from inventory shortages

Answer

Costs of transporting inventory

Question 18

What is the fundamental assumption of the EOQ model?

Accepted Answer

Demand is constant and predictable

Answer

Lead time is subject to variations

Answer

Holding cost remains unchanged regardless of inventory level

Answer

Safety stock is unnecessary

Question 19

Which inventory control practice involves physically counting and verifying inventory levels?

Accepted Answer

Cycle counting

Answer

ABC analysis

Answer

EOQ model

Answer

Safety stock management

Question 20

What is the intended purpose of safety stock in inventory management?

Accepted Answer

To prevent stockouts and ensure product availability

Answer

To mitigate unexpected surges in demand

Answer

To increase inventory turnover rate

Answer

To enhance forecasting accuracy

Question 21

How does good inventory control make customers happier?

Accepted Answer

Faster deliveries and orders filled on time

Answer

Higher costs for storing inventory

Answer

Better cash flow management

Answer

Lower employee productivity

Question 22

Explain how the Quantity Discount Model enhances the traditional EOQ model by incorporating quantity discounts into its calculations.

Accepted Answer

The Quantity Discount Model considers quantity discounts, potentially reducing total costs.

Answer

The Quantity Discount Model assumes a constant demand for the item.

Answer

The Quantity Discount Model is only applicable to high-demand items.

Answer

The Quantity Discount Model ignores the carrying cost of inventory.

Question 23

The main goal of using an Economic Order Quantity (EOQ) model is to:

Accepted Answer

Minimize the total cost of inventory, including holding and ordering costs.

Answer

Maximize the inventory turnover rate.

Answer

Reduce the risk of stockouts.

Answer

Enhance customer service levels.

Question 24

Perpetual and periodic inventory systems differ primarily in that:

Accepted Answer

Perpetual systems continuously track inventory, while periodic systems update inventory at regular intervals.

Answer

Periodic systems continuously track inventory, while perpetual systems update inventory at regular intervals.

Answer

Perpetual systems rely on real-time data, while periodic systems rely on historical data.

Answer

Periodic systems are generally more accurate than perpetual systems.

Question 25

The bullwhip effect in inventory management refers to:

Accepted Answer

The tendency for demand variability to increase as it moves through the supply chain.

Answer

The tendency for demand variability to decrease as it moves through the supply chain.

Answer

The absence of any impact on demand variability as it moves through the supply chain.

Answer

The increase in inventory levels at all stages of the supply chain.

Question 26

Which inventory classification technique sorts items based on their relative importance and monetary value?

Accepted Answer

ABC analysis

Answer

VED analysis

Answer

XYZ analysis

Answer

FGN analysis

Question 27

What is the primary reason for establishing a safety stock?

Accepted Answer

To reduce the risk of stockouts during lead time variations

Answer

To cover unexpected demand fluctuations

Answer

To minimize the frequency of ordering

Answer

To lower overall inventory costs

Question 28

Which inventory control model determines the optimal order quantity to balance total inventory costs?

Accepted Answer

Economic Order Quantity (EOQ) Model

Answer

Least Unit Cost Model

Answer

Material Requirement Planning (MRP)

Answer

Just-in-Time (JIT)

Question 29

What is a distinctive characteristic of a continuous review inventory system?

Accepted Answer

Inventory levels are monitored continuously

Answer

Inventory levels are assessed at fixed intervals

Answer

Orders are placed only when inventory falls below a set point

Answer

Safety stock is not employed

Question 30

Provide the formula to calculate the Economic Order Quantity (EOQ).

Accepted Answer

EOQ = SQRT((2 * D * O) / H)

Answer

EOQ = D * O / H

Answer

EOQ = D / (O * H)

Answer

EOQ = 2 * D * O / H

Question 31

What is a potential disadvantage of periodic review inventory systems?

Accepted Answer

Increased likelihood of stockouts

Answer

Higher inventory storage costs

Answer

Increased ordering expenses

Answer

Less frequent monitoring

Question 32

What is the primary purpose of safety stock in inventory management?

Accepted Answer

To prevent stockouts during periods of high demand

Answer

To reduce ordering costs

Answer

To accelerate inventory turnover

Answer

To eliminate the need for periodic inventory reviews

Question 33

Which inventory control technique categorizes inventory items into A, B, and C based on their annual usage value, with A being the most valuable?

Accepted Answer

ABC Analysis

Answer

Economic Order Quantity (EOQ) Model

Answer

Safety Stock Management

Question 34

Which inventory control technique categorizes items based on their annual dollar usage, with Group A representing items with the highest annual dollar usage?

Accepted Answer

ABC analysis

Answer

VED analysis

Answer

XYZ analysis

Question 35

The model that determines the optimal order quantity to minimize total inventory costs, considering factors such as demand, ordering cost, and holding cost, is:

Accepted Answer

Economic Order Quantity (EOQ)

Answer

Reorder point formula

Answer

Safety stock management

Answer

Economic Production Quantity (EPQ)

Question 36

Which inventory control technique involves maintaining a buffer stock of inventory to mitigate the risk of stockouts during unexpected demand or supply disruptions, ensuring a desired level of customer service?

Accepted Answer

Safety stock management

Answer

First-In, First-Out (FIFO)

Answer

Last-In, First-Out (LIFO)

Answer

Just-in-Time (JIT) inventory

Question 37

Which inventory control technique assigns unique identification numbers to each unit of inventory, allowing for individual tracking and enhanced inventory management?

Accepted Answer

Radio Frequency Identification (RFID)

Answer

Bluetooth Low Energy (BLE)

Answer

Barcoding

Answer

Global Positioning System (GPS)

Question 38

The primary goal of inventory control is to:

Accepted Answer

Optimize inventory levels to meet customer demand while minimizing associated costs.

Answer

Maximize storage space utilization

Answer

Eliminate all inventory

Question 39

Which of the following inventory control techniques involves reducing inventory to the minimum possible level, relying on frequent deliveries to replenish stock, with the aim of minimizing waste and increasing efficiency?

Accepted Answer

Just-in-Time (JIT) inventory

Answer

Safety stock management

Answer

Vendor Managed Inventory (VMI)

Answer

Economic Order Quantity (EOQ)

Question 40

A company uses the FIFO (First-In, First-Out) method of inventory valuation. According to FIFO, which of the following inventory costs are assumed to be sold first?

Accepted Answer

The oldest costs

Answer

The most recent costs

Answer

The current costs

Answer

The average costs

Question 41

Which of the following is NOT a potential benefit of effective inventory control?

Accepted Answer

Reduced customer satisfaction

Answer

Reduced storage costs

Answer

Increased efficiency

Answer

Improved cash flow

Question 42

Which inventory control technique classifies inventory items based on their annual dollar usage value?

Accepted Answer

ABC Analysis

Answer

VED Analysis

Answer

FNS Analysis

Answer

XYZ Analysis

Question 43

Just-in-Time (JIT) inventory is a strategy that aims to:

Accepted Answer

Minimize inventory levels by receiving goods only when they are needed

Answer

Increase lead times to reduce ordering costs

Answer

Maximize inventory levels to meet peak demand

Question 44

Which of the following is a tool used to visually represent inventory levels over time and monitor inventory performance?

Accepted Answer

Inventory Control Chart

Answer

Histogram

Answer

Gantt Chart

Answer

PERT Chart

Question 45

Cycle counting is a periodic physical inventory verification process used in inventory management. What is its primary purpose?

Accepted Answer

To verify the accuracy of inventory records and identify discrepancies

Answer

To determine the cost of goods sold

Answer

To allocate inventory costs to different departments

Answer

To plan for future production

Question 46

Which inventory control technique categorizes inventory items into three groups based on their annual dollar usage value?

Accepted Answer

ABC analysis

Answer

EOQ model

Answer

Just-in-time inventory

Answer

Safety stock management

Question 47

The formula for calculating the Economic Order Quantity (EOQ) includes all of the following factors EXCEPT:

Accepted Answer

Number of units in inventory

Answer

Annual demand

Answer

Carrying cost per unit

Answer

Ordering cost per order

Question 48

The FIFO (First-In, First-Out) inventory costing method assumes that:

Accepted Answer

The oldest inventory items are sold first.

Answer

Inventory items are sold in the same order they were purchased.

Answer

All inventory items are sold at the same price.

Answer

The newest inventory items are sold first.

Question 49

Which inventory control technique utilizes electronic systems to track inventory levels in real-time?

Accepted Answer

Perpetual inventory system

Answer

Periodic inventory system

Answer

Physical inventory system

Answer

ABC analysis

Question 50

The primary objective of inventory control is to:

Accepted Answer

Balance the costs of holding inventory with the risks of stockouts.

Answer

Maximize inventory levels at all times.

Answer

Minimize inventory levels at all times.

Question 51

Which of the following factors does NOT directly influence the determination of the reorder point?

Accepted Answer

Production schedule

Answer

Lead time

Answer

Expected demand rate

Answer

Safety stock level

Question 52

JIT (Just-In-Time) inventory management aims to:

Accepted Answer

Reduce inventory holding costs and improve responsiveness to customer demand.

Answer

Maximize economies of scale in purchasing.

Answer

Increase inventory accuracy and prevent stockouts.

Question 53

Which of the following is a key performance indicator (KPI) used to assess inventory control effectiveness?

Accepted Answer

Inventory turnover ratio

Answer

Customer satisfaction index

Answer

Net profit margin

Answer

Employee productivity rate