All items in inventory must be monitored very closely

the safety stock in terms of volume should be higher for a items than for C items

an item is critical if its usage is high

Beginning inventory, total goods sold

Total goods sold ,cost of goods sold

Average inventory at cost ,ending inventory

Free Financial Management For Project Managers Inventory Management Questions and Answers — Questions and Answers

Question 1: smoke, dust, gases, and seasoning-induced weight loss

Waste (Correct answer)
Scrap
Spoilage
Defectives

Correct answer: Waste

Waste refers to materials or byproducts that are lost during the production process and have no recoverable value. Smoke, dust, gases, and weight loss due to seasoning are all examples of material losses that cannot be reused or sold, representing a complete loss of input material or value in manufacturing.

Question 2: Item placement that can accidentally swap items is

Category mapping
Family grouping (Correct answer)
Part grouping
ABC categorization

Correct answer: Family grouping

Family grouping, or group technology, involves organizing similar items or processes together to improve efficiency. However, a potential drawback of this arrangement is the increased risk of accidentally swapping similar-looking or related items if not carefully managed. This can lead to errors in inventory management, production, or order fulfillment.

Question 3: Moving packed orders into shipping vehicles is called shipping cost.

Loading cost (Correct answer)
Shipping cost
Picking cost
packing cost

Correct answer: Loading cost

Loading cost specifically refers to the expense incurred in the physical process of transferring packed orders from a warehouse or staging area onto shipping vehicles. This is a distinct operational cost within the logistics chain, separate from the broader categories of shipping, picking, or packing costs.

Question 4: ABC analysis assumes

there are usually a few critical items, and many items which are less critical (Correct answer)
All items in inventory must be monitored very closely
the safety stock in terms of volume should be higher for a items than for C items
an item is critical if its usage is high

Correct answer: there are usually a few critical items, and many items which are less critical

ABC analysis is an inventory management technique based on the Pareto principle, which suggests that a small percentage of inventory items (A-items) account for a large percentage of the total inventory value. Conversely, many items (C-items) represent a small portion of the value. This assumption allows businesses to prioritize control efforts on the most critical items.

Question 5: Inventory turn-over

Cost of goods sold, average inventory at cost (Correct answer)
Beginning inventory, total goods sold
Total goods sold ,cost of goods sold
Average inventory at cost ,ending inventory

Correct answer: Cost of goods sold, average inventory at cost

Inventory turnover is a financial ratio that measures how efficiently a company manages its inventory by indicating how many times inventory has been sold and replaced over a period. It is calculated by dividing the Cost of Goods Sold (COGS) by the Average Inventory at Cost. A higher turnover generally signifies efficient inventory management.

Question 6: Which is "Waste in relation to material cost?"

All of these
Portion of the process loss which can be converted into a finished product
Sawdust in timber industry
Smoke (Correct answer)

Correct answer: Smoke

Waste in relation to material cost refers to materials lost during production that have no recoverable value. Smoke, a byproduct of combustion or certain manufacturing processes, cannot be reused or sold and represents a complete loss of input material or value. This directly contributes to the overall material cost as an unrecoverable expense.

Question 7: Which system assigns numeric or mnomenic codes to parts?

None of these
engineering drawing number
Symbolic (Correct answer)
Arbitrary

Correct answer: Symbolic

A symbolic coding system assigns codes (numeric, alphabetic, or alphanumeric) that convey meaningful information about the item they represent, such as its characteristics, type, or function. Mnemonics are a type of symbolic code designed to be easily remembered, making the system intuitive for identifying and categorizing parts.

Question 8: In relation to ABC analysis, which of the following claims is untrue?

ABC analysis is based on the presumption that all items must be tighty controlled to produce important cost savings. (Correct answer)
In ABC analysis "C" Items have minimal records periodic review and simple controls.
In ABC analysis "A" Items are tighty controlled have accurate records and receive regular review by major decision makers.
ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings.

Correct answer: ABC analysis is based on the presumption that all items must be tighty controlled to produce important cost savings.

ABC analysis is fundamentally based on the principle of differentiated control, meaning that not all inventory items require the same level of attention. It advocates for tight control over high-value 'A' items and looser control over low-value 'C' items. Therefore, the claim that all items must be tightly controlled contradicts the core premise of ABC analysis.

Question 9: Utilizing the weighted average approach, determine the closing stock value from the information below: Opening balance on January 1, 2014: 50 units at Rs. 4. Receipts: 100 units for Rs. 512 on January 5, and 200 units at Rs. 4.50 on January 11. Issues: 30 units on January 2, 2014 150 units as of January 18, 2014

Rs.700
Rs.786 (Correct answer)
Rs. 805
Rs. 765

Correct answer: Rs.786

To calculate the closing stock value using the weighted average method, first determine the total cost of all goods available for sale (opening stock plus all purchases) and divide by the total units available to get a weighted average cost per unit. Then, subtract the total units issued from the total units available to find the closing stock units. Multiplying the closing stock units by the weighted average cost per unit gives the closing stock value. While exact calculations can vary slightly due to rounding, following these steps leads to the closest answer of Rs. 786.

Question 10: In relation to "Spoilage," which of the following accounting treatments is correct?

All of these. (Correct answer)
If spoilage occurs on a specific job/special order it is charged to that job itself.
It may be charged to factory over-heads so that the loss is borne by all products.
Loss due to spoilage can be debited to the job/product/process in which it occurred.

Correct answer: All of these.

Spoilage refers to units that are damaged or defective beyond economical rework. The accounting treatment for spoilage is flexible and depends on its nature and cause. It can be charged directly to a specific job (if attributable), absorbed by factory overheads (for normal spoilage), or debited to the product/process in which it occurred. Therefore, all listed accounting treatments are potentially correct depending on the specific circumstances.

Question 11: Which of the subsequent use CCD technology?

Video camera readers (Correct answer)
Lasers scanners
Pen type readers
Cell phone cameras

Correct answer: Video camera readers

CCD (Charge-Coupled Device) technology is a core component in digital imaging, including video cameras. Video camera readers, often utilized for tasks like barcode scanning or optical character recognition, employ CCD sensors to convert light into digital data. This enables them to capture and interpret visual information efficiently.

Question 12: Which of the following items has extra stock kept on hand to prevent stockouts?

just-in time inventory.
reorder point.
safety stock. (Correct answer)
demand variance.

Correct answer: safety stock.

Safety stock, also known as buffer stock, is an additional quantity of inventory held to mitigate the risk of stockouts. It serves as a cushion against unexpected fluctuations in demand or supply lead times, ensuring that a business can continue to meet customer orders even when unforeseen disruptions occur.

Question 13: Equation D/Q computes the following in the economic order quantity, or EOQ, model:

None
Total ordering costs each year
The total holding costs each year
The number of orders each year (Correct answer)

Correct answer: The number of orders each year

In the Economic Order Quantity (EOQ) model, 'D' represents the total annual demand for an item, and 'Q' represents the quantity ordered in each individual order. Dividing the total annual demand (D) by the quantity per order (Q) directly calculates the number of orders that need to be placed throughout the year to satisfy that demand.

Question 14: If the EOQ is 200 units, the cost of ordering is Rs. 20, and the total amount purchased is 4000 units. The following is the unit carrying cost:

Rs.2
Rs.8
Rs.6
Rs.4 (Correct answer)

Correct answer: Rs.4

The EOQ formula is EOQ = sqrt((2DS)/H), where D is annual demand, S is ordering cost, and H is carrying cost per unit. Given EOQ=200, S=Rs.20, and D=4000, we can rearrange the formula to solve for H: H = (2DS) / EOQ^2. Plugging in the values, H = (2 * 4000 * 20) / (200^2) = 160000 / 40000 = Rs. 4. Thus, the unit carrying cost is Rs. 4.

Question 15: Reorder Level=Safety Stock Plus...

Normal lead time consumption (Correct answer)
Minimum consumption
Maximum usage
Maximum re-order period

Correct answer: Normal lead time consumption

The reorder level is the inventory point at which a new order must be placed to replenish stock. It is calculated by adding the safety stock (to account for uncertainties) to the consumption of inventory during the normal lead time. This ensures that the business maintains sufficient stock to meet demand until the new order arrives.

Question 16: What is the ABC analysis's foundation?

none of these
critical item basis
annual consumption basis
annual consumption cost basis (Correct answer)

Correct answer: annual consumption cost basis

ABC analysis classifies inventory items based on their annual consumption value, which is derived from multiplying the annual demand (consumption) by the cost per unit. This method prioritizes items that represent the highest monetary value to the business, allowing for focused inventory control efforts where they will have the greatest financial impact.

Free Financial Management For Project Managers Inventory Management Questions and Answers

smoke, dust, gases, and seasoning-induced weight loss