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CHAPTER 12: INVENTORY MANAGEMENT TRUE/FALSE 1. 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. False (Global company profile, easy) 2. A major challenge in inventory management is to maintain a balance between inventory investment and customer service. True (Introduction, easy) 3. Which item to order and with which supplier the order should be placed are the two fundamental issues in inventory management. False (Introduction, moderate) 4. One function of inventory is to take advantage of quantity discounts. True (Functions of inventory, easy) 5. Work-in-process inventory is devoted to maintenance, repair, and operations. False (Functions of inventory, easy) 6. ABC analysis classifies inventoried items into three groups, usually based on annual units or quantities used. False (Inventory management, easy) 7. In ABC analysis, "A" Items are the most tightly controlled. True (Inventory management, moderate) 8. ABC analysis is based on the presumption that carefully controlling all items is necessary to produce important inventory savings. False (Inventory management, easy) 9. Cycle counting is an inventory control technique exclusively used for cyclical items. False (Inventory management, moderate) 10. One advantage of cycle counting is that it maintains accurate inventory records. True (Inventory management, moderate) 11. In cycle counting, the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification. True (Inventory management, moderate) 12. Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage. True (Inventory management, moderate) 13. The demand for automobiles would be considered an independent demand. True (Inventory models, moderate) 14. Insurance and taxes on inventory are part of the costs known as setup or ordering costs. False (Inventory models, easy) 15. If setup costs are reduced by substantial reductions in setup time, the production order quantity is also reduced. True (Inventory models, and Inventory models for independent demand, easy) 16. The EOQ model is best suited for items whose demand is dependent on other products. False (Inventory models for independent demand, moderate) 17. In the simple EOQ model, if annual demand were to increase, the EOQ would increase proportionately. False (Inventory models for independent demand, moderate) 18. At the economic order quantity, holding costs are equal to purchasing costs. False (Inventory models for independent demand, moderate) 19. In the simple EOQ model, if the carrying cost were to double, the EOQ would also double. ... View Full Document

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