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Chapter 15 Exam

True/False
Indicate whether the statement is true or false.
 

 1. 

Excessive inventory ties up your money so that you cannot use it elsewhere in your business.
 

 2. 

According to the economy of scale concept, producing larger quantities makes the production process more efficient, which decreases per unit cost.
 

 3. 

Just-in-time inventory control keeps the maximum amount of inventory on hand to meet an unexpected demand for a product.
 

 4. 

A perpetual inventory control system is a method of taking a physical count of merchandise at regular intervals.
 

 5. 

The transfer of electronic orders, confirmations, and invoices between businesses is known as electronic data interchange.
 

 6. 

Vendors are companies that sell products to other companies.
 

 7. 

Product specification is the process of checking goods as tey are received to ensure that the quality meets expectations.
 

 8. 

Value is the key to negotiating for quality.
 

Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 9. 

The process of buying merchandise for resale to customers is called...
a.
Sales Forecasting
c.
Purchasing
b.
Inventory
d.
Quality Control
 

 10. 

Each of the following will help you manage inventory to meet customers’ needs EXCEPT...
a.
Selling obsolete inventory
c.
Studying your market
b.
Identifying purchasing needs
d.
Identifying vendors
 

 11. 

The goods and services a company has on hand for resale to its customers is its...
a.
Stockout
c.
Productive Merchandise
b.
Buffer Stock
d.
Inventory
 

 12. 

Which of the following is NOT a task associated with inventory management?
a.
Tracking product orders
b.
Organizing products in wharehouses
c.
Keeping an adequate assortment of product
d.
Understanding what the customer wants
 

 13. 

Turnover rate indicates...
a.
How quickly invoices are paid
b.
How quickly merchandise sells
c.
Long-term sales forecasting
d.
Short-term sales forecasting
 

 14. 

Which of the following is NOT a commonly recognized inventory-control system?
a.
Constant Inventory Control
c.
Perpetual Inventory Control
b.
Periodic Inventory Control
d.
Just-in-time Inventory Control
 

 15. 

To calculate turnover rate, you need to know...
a.
The number of units sold and the monthly supply.
b.
The average number of units on hand and the monthly supply.
c.
The average number of units on hand and the number of units sold.
d.
The productive inventory number and the adequate inventory number.
 

 16. 

Many businesses use the 80/20 rule to...
a.
Estimate lead time to process an order
b.
Forecast inventory
c.
Calculate monthly supply
d.
Calculate turnover rate
 

 17. 

To calculate the number of units needed in stock to meet customer demand, you subtract forecasted units from...
a.
Beginning Inventory Units
c.
The Productive Inventory
b.
The Monthly Inventory
d.
Additional Units Needed in Stock
 

 18. 

The 80/20 rule in inventory forecasting means that...
a.
20% of sales come from 80% of inventory
b.
80% of sales come from 20% of inventory
c.
Your turnover rate is 4
d.
You have 4 months of productive inventory on hand
 

 19. 

How many steps are involved in managing the purchase process?
a.
4
c.
7
b.
5
d.
8
 

 20. 

What is the last step in managing the purchase process?
a.
Selecting the Vendor
c.
Identifying the Vendor
b.
Evaluating the Vendor
d.
Negotiating the Purchase
 

 21. 

When you insist of value, or getting the highest quality for the lowest price in the purchase process, you are...
a.
Making the Purchase
c.
Negotiating the Purchase
b.
Receiving the Order
d.
Selecting the Vendor
 

 22. 

When you are looking over the packing slip to check the contents of your order, you are...
a.
Receiving the Order
c.
Evaluating the Vendor
b.
Making the Purchase
d.
Identifying the Vendor
 

 23. 

When you are receiving the purchase order listing the quantities, varieties, and prices of the product you are ordering, you are in the process of ...
a.
Negotiating the Purchase
c.
Selecting the Vendor
b.
Making the Purchase
d.
Evaluating the Vendor
 

 24. 

Which of the following is one of the keys to stocking the correct merchandise?
a.
Knowing the Vendor
c.
Knowing the Customer
b.
Knowing the Value of the Product
d.
Knowing the Correct Price
 

 25. 

Retailers spend an average of ____ cents of every dollar in sales on inventory.
a.
20 cents
c.
80 cents
b.
50 cents
d.
70 cents
 

 26. 

Inventory management is the process of ...
a.
Storing Products
b.
Keeping an adequate supply of products
c.
Tracking product orders
d.
All of the above
 

 27. 

What category of carrying cost is associated with clerical work and the physical handling of inventory?
a.
Inventory-Service Costs
c.
Capital Costs
b.
Storage Costs
d.
Inventory-Risk Costs
 

 28. 

What category of carrying costs is associated with borrowing cash from lenders to purchase inventory from vendors?
a.
Inventory-Service Cost
c.
Capital Costs
b.
Storage Costs
d.
Inventory-Risk Costs
 

 29. 

Which inventory control system is categorized by inventory software programs to track incoming inventory and sales?
a.
Just-in-time
c.
Periodic
b.
Perpetual
d.
Manual
 

 30. 

Which inventory control system is categorized by taking a physical count of merchandise at regular intervals?
a.
Just-in-time
c.
Periodic
b.
Perpetual
d.
Manual
 

 31. 

Which inventory control system is considered time consuming?
a.
Just-in-time
c.
Manual
b.
Perpetual
d.
Periodic
 

 32. 

Which inventory control system uses POS or Point-of-sale software to record each sale when it happens?
a.
Just-in-time
c.
Periodic
b.
Perpetual
d.
Manual
 

 33. 

Which inventory control system increases efficiency, reduces waste, and frees up cash for other purchases?
a.
Just-in-time
c.
Periodic
b.
Perpetual
d.
Manual
 

 34. 


mc034-1.jpgWhich month shows the lowest demand for laptop computers?
a.
June
c.
January
b.
February
d.
December
 

 35. 

mc035-1.jpgWhat is the total number of unit sales for both laptops and desktops for the month of March?
a.
1400
c.
1250
b.
210
d.
1460
 

 36. 

mc036-1.jpgWhy might demand be high in the month of December?
a.
Holiday Shopping
c.
Everyone has money
b.
Everyone is snowed in
d.
Secret Santa sales
 

 37. 

mc037-1.jpgWhat were the total forecastes sales for laptop computers for the entire year?
a.
2,020
c.
560
b.
16,885
d.
3,380
 

 38. 

mc038-1.jpg
According to this purchase order, the products should be received on...
a.
March 31
c.
The next day
b.
May 1
d.
Information is not available
 

 39. 

Who is responsible to determine the correct amount of money to invest in inventory each year?
a.
The department manager
c.
The business owner
b.
The employee who stocks shelves
d.
None of the above
 

 40. 

When vendors expect to payment on receipt for products received, which step in managing the purchase process is in play?
a.
Receiving the order
c.
Evaluating the vendor
b.
Making the purchase
d.
Paying the invoice
 

Matching
 
 
Choose the correct term from the list for the definition give below.
a.
Buffer Stock
f.
Product Specification Sheet
b.
Invoice
g.
Purchase Order
c.
Lead Time
h.
Receiving Record
d.
Packing Slip
i.
Stockout
e.
Physical Inventory
j.
Turnover Rate
 

 41. 

Running out of stock
 

 42. 

Document listing the contents of a box or container
 

 43. 

Vendor’s bill requesting payment for goods shipped or services provided.
 

 44. 

The total time from order placement until the order is received by the customer.
 

 45. 

Form a buyer sends to a vendor to place an order.
 

 46. 

Additional stock kept above the minimum amount required to meet forecasted sales.
 

 47. 

The number of times inventory has been solde during a specific time period.
 

 48. 

Document that describes the size, color, materials, and weight of a product.
 

 49. 

Form on which merchandise received is listed when it arrives at the customer’s business.
 

 50. 

An actual count of items in iventory.
 



 
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