Multiple Choice.

1. Why is inventory management important?

 It can help you keep track of all your supplies and determine the exact prices.
2. What is the importance of inventory as tangible?
 The main type of asset that companies use to produce their products and services.
3. These costs are one component of total inventory costs, along with ordering and
shortage costs
 Holding Cost
4. Which of the following represents the three primary categories of inventory in inventory
management?
 Raw materials, finished goods, and work-in-process

5. Which of the following best describes Electronic Data Interchange (EDI) in the context of
inventory management?
 The electronic exchange of routine business transactions between computers within
a company or with vendors

Modified True or False

__________ 6. Electronic Data Interchange (EDI) allows you to identify instances where one life moves
ahead of the other and detect system errors such as unauthorized item movements.

___________ 7. When a buyer or seller takes ownership of the goods being shipped, this is
known as the Free (On) Board.

_________ 8. (current) Ratio determines a company's overall liquidity and shows if it can pay its
short-term obligations.

TRUE 9. First-on, First-out (FIFO) is the actual date of use or sale, inventory valuation
makes the assumption that the first things acquired will be the first ones to be used or sold.

_________ 10. The (average) cost method determines the value of inventory and the cost of
goods sold by figuring out the average unit cost of all the items that are for sale at a given time.

Matching Type

11. In which inventory valuation method is the cost of goods sold based on the actual cost
of each item?

Specific Cost Method (also Actual Cost Method)
 12. A manufacturing company wants to estimate the cost of goods sold based on known
costs and expenses, not for tax purposes but as a working tool for budgeting and
internal management. Which inventory valuation method is best for this purpose?
 Standard Cost Method
13. A retail store is facing a surplus of unsold inventory. They want to clear out the excess
stock quickly. What method should they consider?
 Discount the price
14. Which of the following statements is most accurate?
 . About 20% of the items will usually account for about 80% of the total value
15. In relationship to its unloading/loading ratio, an SKU should be placed closer to its point
of use if the ratio is:
 1:28.
Fill in the blanks.

16. The most common “pure” locator systems are______,_______, and_________?

 Memory, fixed and random systems
17. The A-B-C categorization of SKU in inventory management is based on the Pareto
principle, also known as the __?
 80-20 rule
18. _________ is a kind of system that is solely dependent on human recall.
 Memory systems

19. _________ is the warehousing situation where there is storage space available but not
being fully utilized.
 Honeycombing
20. __________is the method of categorizing items based on predetermined factors related
to the business environment and goals of a company.
 Inventory satisfaction

1. Inventory, in the context of business, can be categorized into two main types: tangible and
intangible.
 b) Office furniture and equipment
2. Tangible inventory is typically associated with physical goods that a company stores and
manages.
 c) It is subject to depreciation and wear and tear.
3. How does holding excess inventory relate to the concept of "Inventory as Money"?
 b) It ties up capital that could be used elsewhere-Answer
4. Which of the following is a key factor in controlling inventory shrinkage and preventing theft
in a physical location?
 b) Implementing security cameras and alarms
5. What does the term "Just-in-Time" (JIT) inventory management aim to achieve regarding
inventory control?
 b) Minimize lead times for order replenishment

1. ________ It is bulk discounts that is available if you buy in large rather than in small
Quantities.
 (QUANTITY DISCOUNTS)
2. ________ If you buy a larger quantity of an item less frequently, the ordering costs are less
than buying smaller quantities over and over again.
 (LOWER ORDERING COST)
3. _______ It includes completed products waiting to be sold, e.g., bar stools, bread, cookies.
 (FINISHED GOODS)
4. ________ It is solely dependent on human recall. Often, they are little more than someone
saying, “I think it’s over there.
 (MEMORY SYSTEMS)
5. ________ Is centered around an item’s characteristics. Like a fixed system, only items with
certain characteristics can live in a particular area. Items with different attributes can’t live
there.
 (ZONING SYSTEMS)

1. The cost incurred by keeping stock or goods in storage facilities.

 E. Holding Cost
2. Unfinished goods currently in the production process at the end of each accounting period.
 H. Work in progress
3. An inventory costing method that assumes the first items purchased are the first to be sold.
 B. FIFO method
4. The process of allocating each item in your inventory in a certain spot in your warehouse.
 D. Inventory Allocation
5. A technique for categorizing inventory items into three classes based on their importance
 F. ABC Categorization

____1. Lower ordering costs refers to a contract between a buyer and a seller wherein the
parties stipulate that the price of an item or service will remain fixed for a specific period of
time.
 Price Protection
____2. Article 2-319 states that when the term is F.O.B. the place of shipment, the buyer
must at that place ship the goods in the manner provided in this article and bear the expense
and risk of putting them into the possession of the carrier.
 Seller
____3. R-Factor refers to the safety stock factor used to determine the percentage of safety
stock to protect against the risk of stockouts.
 Amount
____4. Random location system minimizes the space.
 Maximizes

TRUE 5. The stock keeper should select a locator system that provides the best solution given
the tradeoffs between conflicting objectives.

1. When a buyer or seller takes ownership of the goods being shipped, this is
known as.
 b) Free on Board (FOB)
2. Technology that helps trading organizations and partners get more done faster by
speeding up logistics timelines and eliminating manual errors through business-to-business
communication automation.
 a) Electronic Data Interchange (EDI)
3. These are the basic materials and components used in the manufacturing
processes. They are the foundation for creating finished goods.
 e) Raw Materials
4. This type of inventory can serve various purposes, such as compensating for
demand and supply uncertainties. It also holds it to “decouple” and separate
different parts of your operation so that they can function independently from one
another.
 d) Buffer/Safety Inventory
5. This governs the transfer of title to product. Also, it has been adopted by most
states. The Article 2 of this ______ covers the sale of goods.
 f) Uniform Commercial Code (UCC)
6. Provides time to plan and produce items while _______ is interacting with
Suppliers. It prevents downtime and allows for a continuous flow
 c) Procurement
7. It is a component of the Inventory Management System that provides information
for the fundamental accounting equation, which involves a business’s assets,
liabilities, and owner's equity.
 b) Balance Sheet
8. These products are no longer being sold by many consumers, but at times, the
sellers keep marketing them, particularly on Shopee where the products they offer
have poor quality and sell them at a low price.
 e) Obsolete Stock
9. Raw materials, _______, and finished goods are the basic types of inventories.
 c) Work-in-Progress
10. The ______ is the inventory valuation method that assumes the first goods
purchased are the first to be used or sold regardless of the actual timing of their
use or sale.
 a) FIFO method
11. The ______ is the inventory valuation method that is often used by manufacturing
companies to give all their departments a uniform value for an item throughout a
given year.
 d) Standard Cost Method

12. This refers to the practice of leaving empty or unused spaces between storage
racks or shelves in a warehouse or storage facility to accommodate potential future
inventory or to maintain ease of access.
 e) Honeycombing
13. A stock Keeping Unit (SKU) code is an identifier that includes letters and ______
to state important characteristics of a product, such as the brand, color, and size.
 d) Numbers
14. ______ are solely dependent on human recall. Often, they are little more than
someone saying, "I think it's over there."
 f) Memory System
15. This is centered around an item's characteristics. Like a fixed system, only items
with certain characteristics can live in a particular area.
 a) Zoning System
16. It enables you to assign specific locations to those items requiring special
consideration, while the bulk of the product mix will be randomly located.
 c) Combination System
17. Which of the following is a benefit of using a pure random location system for
inventory management?
 It reduces the amount of space required to store inventory.

18. Locator systems provide a narrow overview of where SKUs will be found within a
facility.
 BOARD
19. One of the advantages of Memory Location Systems is that it simplifies and
expedites both receiving and stock replenishment because predetermined put away
instructions can be generated.
 FIXED
20. In the zoning system nothing has a home, but you know where everything is. This
allows the maximization of space since no item has fixed home and may be placed
wherever there is space.
 RANDOM
 1. The cost comes about regardless of the actual value of goods.
 A. Ordering/ Acquisition cost
2. These costs include the cost of capital tied up in inventory.
 B. Holding cost
3. What do you call a product that is completed and ready for sale?
 C. Finished product
4. F.O.B origin means that the title stays with the seller when the goods are
delivered to the carrier.
 DESTINATION
5. It is a type of stock wherein the product is moving within a facility.
 D. Transit Inventory
6. Bulk discounts can be availed if you purchase small quantities of product.
 LARGE
7. Transit Inventory is an inventory produced in anticipation of an upcoming
season.
 ANTICIPATION STOCK

8. Also referred to as "financial leverage ratios." This evaluates the ability of an organization to
stay afloat over the long haul by paying off its long-term debt.
 C. Solvency ratios

9. Equity is anything owned or a possession of the business. It can be in form of

cash or monetary value including inventory.
 ASSET
10. Its main function is to report the financial performance of the company or business in a given
period of time.
 B. Income statement
11. Finished Goods inventory is made up of goods that will be used in the
production of finished products, e.g., nuts, bolts, flour, and sugar.
 RAW ATERIALS
12. ________ (also Actual Cost Method) of inventory valuation assumes that the organization
can track the actual cost of an item into, through, and out of the facility.
 B. Specific cost method
13. Any stock keeper who has had to repeatedly move really slow-moving or outright dead stock
out of the way or finds herself hurting for space because product eats up square foot after
square foot knows that these items “just gotta go.”
 Obsolete stock
14. Which of the following are the methods for valuing inventory?
 FIFO, LIFO, Average Cost, Specific Cost, Standard Cost.
15. Random systems enable you to assign specific locations to those items
requiring special consideration, while the bulk of the product mix will be randomly located.
 COMBINATION
16. stockkeeper should select a locator system that provides the best solution
given the tradeoffs between conflicting objectives.
 TRUE
17. True or False: Effective item placement can often be achieved through tying both the
inventory stratification and family grouping approaches together.
 TRUE
18. Monitor the movement of products from the moment they are received to their storage
location.
 C. Track storage and movement
19. The right system should minimize the risk of accidents and/or mishandling.
 B. Protection from damage
20. The locator system must make the most of the limited storage space, minimizing waste and
maximizing capacity.
 Space efficiency

1. An SKU’s address is the location it is in while it is there. [D]

 D. Random Location System
2. This is inventory en route from one place to another. [C]
 C. Transit Inventory
3. The type of stock where raw materials are being converted into partial products,
subassemblies, and finished products. [A]
 Work-in-Process
4. It is an expression of how many of one item is contained within another. [B]
 B. Ratio D. Liabilities
5. It determines where should a particular item or category of items be physically
positioned. [A]
 Item Placement Theory C. Inventory Stratification

___________1.
In this inventory, you need to control how much raw materials,
parts, and subassemblies you process at a given time
 [Predictability]
___________2.
This method is a "best guess" approach based on known
costs and expenses such a historical cost.
 [Standard Cost Method]]
___________3. This will result in a lowering of your on-hand inventory needs
 [Unreliability of Supply]
___________4. Only items with certain characteristics can live in a particular
area.
 [Zoning System]
___________5. Anything that appears as an asset on the balance sheet has
an accounting value.
 [Impact of Write Off]

1. Consumables are used to produce partial products or completed goods.

 [Raw Materials]
2. Predictability protects you from unreliable suppliers or when an item is scarce and it
is difficult to ensure a steady supply.
 [Unreliability of Supply]
3. The First-in, First-out inventory valuation assumes that the most recently purchased
or acquired goods are the first to be sold regardless of the actual timing of their use
or sale.
 [Last-in]
4. Ratios are not useful tools to explain trends and summarize business results.
 [Not]
5. Honeycombing is avoidable given location system trade-offs, product shape, and so
on.
 [unavoidable]

[C] 1. A technology that helps trading organizations

and partners get more done faster.
 C. Electronic Data Interchange
[G] 2. This method is most closely tied to actual
physical flow of goods in inventory.
 G. First-in, First-out (FIFO
[A] 3. Refer to a category of technology or
infrastructure where specific devices or
equipment are permanently placed or located
in a designated position.
 Fixed location systems
[B] 4. Enable you to assign specific locations to
those items requiring special consideration,
while the bulk of the product mix will be
randomly located.
 B. Combination Systems
[E] 5. The title shifts to the buyer when the goods
are delivered to the carrier.
 E. F.O.B Origin
1.) The following are the 3 ratios that are useful when assessing inventory, except one. [C]
 c.) Equivalent Ratio
2.) Which of the following is not a basic type of inventory: [D]
 d.) Unfinished Goods
3.) An Inventory produced in expectation of an upcoming season. [C]
 c). Anticipation Stock
4). Cost of Goods Sold is. [A]
 a). an expense
5.) It reflects the number of trips necessary to bring an item to a storage location compared
with the number of trips required to transport it from a storage point to a point-of-use. [C]
 c) Unloading to Loading Ratio

1.) Holding Cost includes the cost of capital tied up in inventory.

 [True]
2.) The term "price protection" refers to a contract between a buyer and a seller wherein the
parties stipulate that the price of an item or service will remain fixed for a specific period of
time.
 [True]
3.) Free on Board is when a buyer or seller takes ownership of the goods being received.
 [Shipped]
4.) Space planning for an entire inventory in a dedicated location environment is done
around a 1-year time period.
 [True]
5.) One of the Pros of Family Grouping is that items are so similar they can be substituted
with each other.
 [Cons]
6.) Memory Systems allows full utilization of space.
 [True]
7.) Inventory Stratification comprises two parts, the A-B-C categorization of SKUs and the
Utilization of an SKU’s unloading/loading ratio.
 [True]
8.) Random Location Systems allows control of where all the items are in any given time.
 [True]
9.) In Fixed Location Systems, no item has a home.
 [All]
10.) Honeycombing occurs both horizontally and diagonally.
 [Vertically]

1.) A product approach that is an alternative to the A-B-C method.

 [Family Grouping]
 2.) The method of categorizing items based on predetermined factors related to business
environment and goals of a company.
 [Inventory Stratification]
3.) An Inventory valuation method that assumes ending inventory consists of all goods
available for sale.
 [Average Cost Method]
4.) A location system that is centered around an item’s characteristics.
 [Zoning Systems]
5.) Items that are never “obsolete” or dead until the equipment or device they are used for is
no long in service.
 [S&R Items]

1. Raw materials are used to produce partial products or completed goods.

 True
2. __________ is where routine business transactions are sent over standard
communication lines (such as telephone lines) between computers within a company or
be- tween your computer and that of a vendor.
 Electronic Data Interchange
3. _________ is inventory en route from one place to another.
 c. Transit Inventory
4. Work-in-process (WIP) is the product ready for current customer sales.
 False: FINISHED PRODUCT
5. Inventory shields you from untrustworthy sources when a product is in short supply, and
it is difficult to maintain a consistent supply.
 True
6. _______ Refers to a contract between a buyer and a seller that states that the cost of an
item or service will be set for a certain amount of time.
 Price Protection
7. ______ A promotion that decreases the cost per unit of goods or materials when a larger
number of them are purchased.
 Quantity Discount
1. Give one basic type of Inventory.
 WIP
2. Total Cost of Goods/Total Quantity of Goods = Average Cost
 True
3. It allows the user to charge the actual cost of a given item to production or sales.
 c. Specific Cost Method
4. This method values inventory as though the first inventory item purchased are the first to
be sold.
 b. FIFO
5. It articulates a company’s assets and liabilities at a single, specific time.
 A.) Balance Sheet
6. What are the three ratio that are useful when assessing inventory?
I. Current Ratio
II. Acid Test
III. Inventory Turnover Ratio
 I, II, and III only

1. 20 percent of all items represent 80 percent of the dollar value of all items. What law is
the concept derived from?
 Pareto’s Law
2. _________ generally, stands for a specific identifying numeric or alpha-numeric identifier
for a specific item.
 SKU or Stock Keeping Unit
3. Zoning System is a type of Random Location System.
 False; SKU or Stock Keeping Unit
4. The following is true in a Random Location System:
I. May be unnecessarily complicated if your organization has a small number of SKUs.
II. Maximizes space.
III. Have control of where all items are at any given time.
 c. I, II, and III only
5. ________ is centered around an item’s characteristics. Like a fixed system, only items
with certain characteristics can live in a particular area.
 ZONING
6. Inventory stratification consists of four parts.
 False; TWO
7. Which of the following statements is incorrect regarding the benefits of location address
and SKU identifiers?
 c. Staffs will have a harder time on navigating their inventory system with the
complex nature of Location address and SKU identifiers.