Inventory Management MCQs | Inventory Management Multiple Choice Questions and Answers

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Questions
1 Which of the following is not an inventory?
A Machines
B Raw material
C Finished products
D Consumable tools

Answer: Machines
2 The cost of insurance and taxes are included in
A Cost of ordering
B Set up cost
C Inventory carrying cost
D Cost of shortages

Answer: Inventory carrying cost
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3 The minimum stock level is calculated as
A Reorder level – (Nornal consumption x Normal delivery time)
B Reorder level + (Nornal consumption x Normal delivery time)
C (Reorder level + Nornal consumption) x Normal delivery time
D (Reorder level + Nornal consumption) / Normal delivery time

Answer: Reorder level – (Nornal consumption x Normal delivery time)
4 The time period between placing an order its receipt in stock is known as
A Lead time
B Carrying time
C Shortage time
D Over time

Answer: Lead time
5 Re-ordering level is calculated as
A Maximum consumption rate x Maximum re-order period
B Minimum consumption rate x Minimum re-order period
C Maximum consumption rate x Minimum re-order period
D Minimum consumption rate x Maximum re-order period

Answer: Maximum consumption rate x Maximum re-order period
6 The Economic Order Quantity (EOQ) is calculated as
A (2D*S/h)^1/2
B (DS*/h)^1/2
C (D*S/2h)^1/2
D All of the above

Answer: (2D*S/h)^1/2
7 If demand in units is 18000, relevant ordering cost for each year is $150 and an order quantity is 1500 then annual relevant ordering cost would be
A $200
B $190
C $160
D $180

Answer: $180
8 Profit forgone by capital investment in inventory rather than investment of capital to somewhere else is classified as
A relevant purchase order costs
B relevant inventory carrying costs
C irrelevant inventory carrying costs
D relevant opportunity cost of capital

Answer: relevant opportunity cost of capital
9 Costing system which omits some of journal entries in accounting system is known as
A ain-time costing
B trigger costing
C back flush costing
D lead time costing

Answer: back flush costing
10 If required rate of return is 12% and per unit cost of units purchased is $35 then relevant opportunity cost of capital will be
A $6.20
B $7.20
C $4.20
D $5.20

Answer: $4.20
11 If purchase order lead time is 35 minutes and number of units sold per time is 400 units then reorder point will be
A 14000 units
B 14500 units
C 15000 units
D 15500 units

Answer: 14000 units
12 If demand of one year is 25000 units, relevant ordering cost for each purchase order is $210 and carrying cost of one unit of stock is $25 then economic order quantity is
A 678 packages
B 648 packages
C 658 packages
D 668 packages

Answer: 648 packages
13 Which of the following is true for Inventory control?
A Economic order quantity has minimum total cost per order
B Inventory carrying costs increases with quantity per order
C Ordering cost decreases with lo size
D All of the above

Answer: All of the above
14 Re-ordering level is calculated as
A Maximum consumption rate x Maximum re-order period
B Minimum consumption rate x Minimum re-order period
C Maximum consumption rate x Minimum re-order period
D Minimum consumption rate x Maximum re-order period

Answer: Maximum consumption rate x Maximum re-order period
15 Average stock level can be calculated as
A Minimum stock level + ½ of Re-order level
B Maximum stock level + ½ of Re-order level
C Minimum stock level + 1/3 of Re-order level
D Maximum stock level + 1/3 of Re-order level

Answer: Minimum stock level + ½ of Re-order level
16 The time period between placing an order its receipt in stock is known as
A Lead time
B Carrying time
C Shortage time
D Over time

Answer: Lead time
17 Activities related to coordinating, controlling and planning activities of flow of inventory are classified as
A decisional management
B throughput management
C inventory management
D manufacturing management

Answer: inventory management
18 Cost of product failure, error prevention and appraisals are classified as
A stocking costs
B stock-out costs
C costs of quality
D None of the above

Answer: costs of quality
19 An example of purchasing costs include
A incoming freight
B storage costs
C insurance
D spoilage

Answer: insurance
20 If an average inventory is 2000 units and annual relevant carrying cost of each unit is $5 then annual relevant carrying cost will be
A $5,000
B $4,500
C $5,500
D $6,000

Answer: $5,000

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