Chapter 20 Test Bank

Chapter 20 Test Bank - CHAPTER 20 INVENTORY MANAGEMENT,...

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CHAPTER 20 INVENTORY MANAGEMENT, JUST-IN-TIME, AND SIMPLIFIED COSTING METHODS TRUE/FALSE 1. Retailers generally have a high percentage of net income to revenues. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : inventory management Retailers have a low percentage of net income to revenues. 2. Inventory management is the planning, organizing, and controlling activities that focus on the flow of materials into, through, and from the organization. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : inventory management 3. Purchasing costs generally include the freight and transportation costs on goods acquired from suppliers. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : purchasing costs 4. Expediting costs of a stockout include the additional ordering costs, plus any associated transportation costs. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : stockout costs Expediting costs include the associated transportation costs. 5. Carrying costs arise when an organization experiences an ability to deliver its goods to its customers. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : carrying costs Carrying costs arise when an organization holds its goods for sale. 6. Sharing inventory data throughout the supply chain leads to more “rush” orders occurring. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : inventory management Sharing inventory data throughout the supply chain leads to fewer “rush” orders occurring. 20-1
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7. The simplest version of the Economic Order Quantity model incorporates only ordering costs, carrying costs, and purchasing costs into the calculation. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : economic order quantity (EOQ) Purchasing costs are ignored in the Economic Order Quantity. 8. To determine the Economic Order Quantity, the relevant ordering costs are minimized and the relevant carrying costs are maximized. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : economic order quantity (EOQ) We minimize both the relevant ordering costs and the relevant carrying costs. 9. The Economic Order Quantity increases with demand and ordering costs and decreases with carrying costs. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : economic order quantity (EOQ) 10. The annual relevant total costs are at a minimum where relevant ordering costs and their relevant carrying costs are equal. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : economic order quantity (EOQ) 11. The annual relevant carrying costs of inventory consist of incremental costs plus the opportunity cost of capital. Answer : True Difficulty : 3 Objective : 3 Terms to Learn : carrying costs 12. Just-in-time purchasing requires organizations to place smaller purchase orders with their suppliers. Answer
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Chapter 20 Test Bank - CHAPTER 20 INVENTORY MANAGEMENT,...

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