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Indicate whether the statement is true or false.
1. Cash-to-cash conversion cycle is the average time to convert a dollar spent to acquire raw materials into a dollar
collected for a finished good.
a. True
b. False
2. A high average inventory value reduces the chances of inventory obsolescence.
a. True
b. False
3. Technology upgrades and backup systems and sites can help mitigate security risks.
a. True
b. False
4. Import tariffs help in preventing the dumping of low-cost products in the domestic economy.
a. True
b. False
5. Electronic data interchange and Internet links decrease the velocity of supply chains.
a. True
b. False
6. Air shipments have the lowest transportation cost and can carry unlimited weight.
a. True
b. False
Indicate the answer choice that best completes the statement or answers the question.
7. Inventory days’ supply (IDS) is calculated as Average total inventory / _____.
a. Transportation cost
b. Average sold inventory
c. Total annual sales of goods
d. Cost of goods sold per day
8. Which of the following is NOT true about returns of sold goods?
a. The key idea of returns is to reduce consumer risk when purchasing items on-line.
b. In many situations, moving an item backwards in the supply chain is more costly than moving new products
forward in the supply chain.
c. Returned items can resold as new, refurbished, repaired, or recycled.
d. The cost of returns averages between 7 to 10 percent of the cost of goods sold, but it is decreasing.
9. Which of the following is true of order amplification?
a. Order amplification in the supply chain leads to the bullwhip effect.
b. Large order sizes can help manage order amplification.
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c. Order amplification decreases as one moves back up the supply chain away from the retail customer.
d. Increasing price fluctuations can help manage order amplification.
10. TekSupply Inc., an automobile parts supplier, held an average automobile parts inventory of $4 million last year. Its
cost of goods sold was $25 million. Therefore, the automobile parts experienced an inventory turnover of _____ turns last
year.
a. 2.5
b. 4.25
c. 6.25
d. 9.5
11. ProShopper, a sportswear store, held an average sportswear inventory of $10 million last year and reported an
inventory turnover of 5 times per year. What was its cost of goods sold?
a. $10 million
b. $20 million
c. $40 million
d. $50 million
12. Which of the following is true of purchasing?
a. It can have a significant impact on total supply chain costs.
b. It is critical to satisfy employees’ needs and expectations.
c. The delivery of goods and services is the responsibility of the purchasing function of a supply chain.
d. The principal goal of purchasing is to source products from a single supplier to avoid capacity risks.
13. A(n) _____ is any entity—real or virtual—that coordinates and shares information between buyers and sellers.
a. manufacturer
b. franchisor
c. intermediary
d. investor
14. Josh Smith, the materials manager at a retail store, has determined that a particular product experienced 5 turns last
year, with an annual sales volume of $15 million. What was the average inventory value for this product last year?
a. $1 million
b. $2.5 million
c. $3 million
d. $4.5 million
15. _____ specialize in handling all aspects of customers giving back a manufactured good or delivered service and
requesting their money back, repairing the manufactured good and giving it to the customer, and/or invoking the service
guarantee.
a. Certified suppliers
b. Process designers
c. Demand forecasters
d. Return facilitators
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16. _____ is the discipline of managing the flow of materials and transportation activities to ensure adequate customer
service at reasonable cost.
a. Logistics
b. Scheduling
c. Procurement
d. Integration
17. Speedex, an automobile company, has an annual sales volume of $3 million, cost of goods sold equal to $2 million,
total average on-hand inventory of $600,000, and 150 operating days in a year. What is the daily revenue earned by the
company?
a. $10,000
b. $20,000
c. $30,000
d. $40,000
18. Which of the following best defines inventory turnover?
a. It is the cost associated with repairs of goods that have been returned.
b. It is the time taken to fill a customer’s order.
c. It is a measure of how quickly goods are moving through the supply chain.
d. It is a measure of the number of perfect orders.
19. In the context of measuring supply chain performance, the goal of sustainability measures is to:
a. reduce the order cycle time for all customers.
b. have a byproduct-free production process.
c. have a carbon-neutral supply chain.
d. minimize the time taken to fill a customer’s order.
20. _____ inventory is inventory that has been ordered but is in transit.
a. Pipeline
b. Decoupling
c. Buffer
d. Anticipation
21. _____ refers to managing the flow of finished goods, materials, or components that may be unusable or discarded
through the supply chain from customers toward either suppliers, distributors, or manufacturers for the purpose of reuse,
resale, or disposal.
a. Reverse logistics
b. Response management
c. Process design
d. Scheduling
22. Managing orders, transportation, and distribution to provide goods and services is part of the _____ function of the
Supply Chain Operations Reference (SCOR) model.
a. plan
b. source
c. make
d. deliver
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23. Based on the following information, how many days of supply of inventory is the firm holding (assume 260 days of
operation per year)? Do not round intermediate calculations. Round your answer to one decimal place.
Sales $8,300,000
Cost of goods sold $7,540,000
Gross profit $760,000
Overhead costs $600,000
Net profit $160,000
Total inventory $2,600,000
Fixed assets $3,100,000
Long-term debt $2,300,000
a. 89.7 days
b. 99.2 days
c. 89.2 days
d. 95.2 days
24. Which of the following is a disadvantage of vendor-managed inventory (VMI)?
a. It often results in higher customer inventories than necessary.
b. It does not allow vendors to view inventory needs from the customer’s perspective.
c. It prohibits the use of customer information, which leads to poor control of inventory and capacity.
d. It prevents vendors from making production decisions using downstream customer demand data.
25. If an online retail store has cost of goods sold equal to $2 million, has 200 operating days in a year, and has a total
average on-hand inventory of $500,000, the cost of goods sold per day is _____.
a. $2,500
b. $15,000
c. $7,500
d. $10,000
26. In the context of the metrics used to identify improvements to the operation of supply chains, financial measures:
a. include perfect order fulfillment and perfect delivery fulfillment.
b. show how supply chain performance affects the bottom line.
c. calculate order fulfillment lead time in supply chains.
d. show how quickly goods move through supply chains.
27. _____ is the supply chain function responsible for acquiring raw materials, component parts, tools, services, and other
items required from external suppliers.
a. Procurement
b. Scheduling
c. Integration
d. Job design
28. The Pharmaceutical Manufacturers Association defines a _____ as one that, after extensive investigation, is found to
provide material of such quality that routine testing on each lot received is unnecessary.
a. certified supplier
b. contract manufacturer
c. licensed franchisor
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d. return facilitator
29. The _____ function of a supply chain is responsible for selecting transportation carriers and managing company-
owned fleets of vehicles.
a. integration
b. procurement
c. logistics
d. scheduling
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Answer Key
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