65) When storage space or the type of item does not suit the two-bin system, the owner can use
the ________.
A) sales system
B) inventory system
C) tag system
D) weighted average system
66) When conducting a physical inventory, ________ involves counting a number of items on a
continuous basis.
A) semi cycle counting
B) cycle counting
C) perpetual inventory
D) None of the above
67) An advantage of JIT is that it:
A) reduces costly inventories.
B) maintains minimum inventory.
C) helps the company’s cash flow.
D) All of the above
68) The primary human elements on which successful JIT systems are built are:
A) mutual trust and teamwork & productivity.
B) mutual trust and teamwork and empowerment.
C) lower labor cost and productivity.
D) high profit and lower labor cost.
69) The inventory turnover ratio is computed by:
A) dividing the firm’s cost of goods sold by its average inventory.
B) dividing average inventory by firm’s cost of goods sold.
C) dividing the firm’s revenue by its average inventory.
D) dividing all costs by its average inventory.
70) The 80/20 rule states that 80% of each sales dollar should be spent on purchases, and the
remaining 20% should go towards covering costs and making a profit.
71) Perpetual inventory systems keep a continuous tally of each item added to or subtracted from
the company’s stock of merchandise.
72) Because of their relatively inexpensive nature, perpetual inventory systems are used most
frequently and successfully in controlling low-dollar, high-volume items.
73) Computerized point-of-sale systems have given small business owners the ability to use
perpetual inventory control systems across a larger portion of their inventories.
74) Point-of-sale systems can be programmed to alert the business owner when key items drop
below the reorder point.
75) Partial inventory systems are designed to maintain a running count of the items in inventory.
76) Point of sale (POS) systems do not perform any of the functions of a traditional cash register
but they do maintain an up-to-the minute inventory count.
77) The most common method of controlling inventory in a small business is the perpetual
system.
78) Visual inventory control systems work best with firms that have strong variations in their
sales.
79) ABC inventory systems are designed to maintain a running count of the items in inventory.
80) The dollar usage volume of an item is how the importance of the item to inventory is
measured in an ABC inventory system.
81) The basic principle of ABC analysis is that inventory costs are reduced when the small
business owner spends time and effort controlling items representing the greatest inventory
value.
82) In an ABC inventory system, approximately 50% of the inventory usually is counted as C
category items.
83) In an ABC system, “A” items are those that account for a low dollar usage volume.
84) The purpose of classifying items according to their value in ABC analysis is to establish the
proper degree of control over each inventory item.
85) “C” items typically comprise a minor proportion of the small firm’s inventory value.
86) “A” items should be controlled under a perpetual inventory system with as much detail as
necessary.
87) In a two-bin system, the amount of stock in the second bin should equal the quantity ordered.
88) The tag system of inventory management is the equivalent of the two-bin system but is used
by retail, wholesale, and service businesses.
89) Total inventory costs are reduced when the small business manager spends her time and
effort controlling items that represent the greatest inventory value.
90) Choosing the most appropriate system of inventory control eliminates the need for the small
business owner to conduct a periodic physical inventory count.
91) Small business owners using the ABC system of inventory control need not worry about
conducting a physical inventory count.
92) Because they keep continuous track on each item added to or taken from inventory, perpetual
inventory control systems eliminate the need for a physical inventory count.
93) Simon counts a few items of his inventory every week, working his way through the entire
inventory during the year. Simon is using cycle counting to control his inventory.
94) Cloud-based systems enable business owners to track their inventories and to place orders
with vendors quickly and with few errors by linking them to their vendors electronically.
95) For changes in inventory management to be considered consistent with a “just-in-time”
philosophy they must use both EDI and POS technology to manage the inventories.
96) “Just-in-time” inventory control techniques are best suited for manufacturing operations
where there are significant inventory levels and where the manufacturing operations are unique
and varied, producing custom items.
97) One force driving the move to JIT inventory management is competition among companies
to provide excellent customer service.
98) The radical change involved in JIT II is that suppliers’ employees work onsite with the
customer’s plant and there is a sharing of what is normally confidential information.
99) JIT II in the retail and service industries is more commonly called efficient customer
response.
100) Small business owners should avoid cutting prices on slow-moving items since it is better
to hold onto them and try to sell them later at normal prices.
101) Carrying unsold inventory from one year to the next is senseless since it represents an
investment earning no return and it ties up working capital that could be put to more productive
uses.
102) Research shows that the nature of the business contributes to its vulnerability to crime.
103) The greatest criminal threat to small business is from professional crooks in the form of
shoplifters, fraudulent insurance sales, and computer scams.
104) Participants in a study on fraud losses estimate that they lose about 6% of their annual
revenues to employee theft and fraud.
105) Generally speaking, it is not the “workaholic” employee but the one who seems to be
hanging around a lot who is a risk factor for employee theft.
106) If an owner or his/her relatives take the product home without properly logging it out,
employees will perceive that it is okay and will be more likely to “steal” from the company in
this way.
107) Both unreasonable rules and un-enforced rules are equally harmful to small business
security.
108) Small businesses have had employees steal by putting merchandise in the trash, take it out,
and then return to the dumpster and remove it after their shift is over.
109) Doing daily inspections of the cash register tape to check for employee theft are of little
value since the theft would have already taken place and it would be difficult to trace and prove
at that point.
110) Keeping internal records current is a simple but effective deterrent to employee theft.
111) Many incidents of employee theft go undetected, and only a small percentage of those
employees who are caught stealing are prosecuted.
112) Approximately 6% of the average price tag in a small business is there due to shoplifting
losses.
113) Owners do not need to prosecute juvenile shoplifters when they are caught, as the scare of
getting caught is often enough to make them stop.
114) Surprisingly, kleptomaniacs account for nearly 9% of all small business retail losses.
115) When watching for shoplifters, owners should remember that impulse shoplifters tend to
work alone while juveniles and professionals work in groups.
116) The best way to deal with shoplifting is to take steps to prevent it rather than stress catching
the shoplifter in the act.
117) A valuable shoplifting reduction technique is to train employees on what to watch for in
potential shoplifters.
118) Generally, training employees is more expensive than the losses to shoplifting but if
employees are trained shoplifters will eventually leave your store alone.
119) How the store is laid out has little impact on shoplifting unless video cameras are installed
as well.
120) 98% of the time, shoplifters are successful in their thefts.
121) To make shoplifting charges stick, two of the things the owner/employee needs to be able to
do is to identify the merchandise as belonging to the store and that it was not paid for.
122) Small business owners should always prosecute and not worry about negative publicity or
legal entanglements.
123) Juveniles account for approximately one-fifth of all shoplifters.
124) Impulse shoplifters steal on the spur of the moment when they succumb to temptation.
125) Shoplifters motivated to steal to support a drug or alcohol habit are usually hard to detect
because their behavior is usually stable and consistent.
126) Kleptomaniacs have a compulsive need to steal even though they have little, if any, need for
the items they shoplift.
127) Although only about 15 percent of shoplifters are professionals, they can severely damage a
business.
128) Inventory management involves seven other interrelated steps. Identify each and explain
their importance to inventory management.
129) Briefly explain each of the three primary inventory systems.
130) What is a perpetual inventory control system? Explain its advantages and disadvantages.
131) Discuss the ABC method of inventory control.
132) What is the value of a physical inventory count? In what ways can it be done?
133) Explain the concept of the “just-in-time” inventory control technique. Under what
circumstances would JIT be most appropriate?
134) What is JIT II? How does it differ from JIT? What is the importance of those differences?
135) How can a small business owner turn slow-moving inventory items into cash?
136) Why do employees steal?
137) How can a small business owner prevent employee theft?
138) Who are the people who shoplift and what can the small business owner do to deter
shoplifting?