Inventory Management Flashcards
16 cards from real Financial Management for Project Managers practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 16 Inventory Management flashcards as text
smoke, dust, gases, and seasoning-induced weight loss
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.
Item placement that can accidentally swap items is
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.
Moving packed orders into shipping vehicles is called shipping cost.
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.
ABC analysis assumes
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.
Inventory turn-over
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.
Which is "Waste in relation to material cost?"
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.
Which system assigns numeric or mnomenic codes to parts?
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.
In relation to ABC analysis, which of the following claims is untrue?
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.
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
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.
In relation to "Spoilage," which of the following accounting treatments is 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.
Which of the subsequent use CCD technology?
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.
Which of the following items has extra stock kept on hand to prevent stockouts?
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.
Equation D/Q computes the following in the economic order quantity, or EOQ, model:
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.
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:
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.
Reorder Level=Safety Stock Plus...
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.
What is the ABC analysis's foundation?
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.