Sparks Academy Student - Test Series Result PPC

11/22/21, 9:37 PM Sparks Academy Student - Test Series Result
PPC - Inventory Control (1 Marks) Result
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1).
The purchasing system for S and D items should be
(A).
As simple as possible
(B).
An elaborate system with many control points
(C).
A system with minimum number of control points
(D).
As simple as possible with minimum lead time
Solution.
2).
V-E-D analysis is recommended for control
(A).
at department level
(B).
of important items
(C).
for spare parts
(D).
of 'dead' stock
Solution.
VED analysis used for Spare parts which is classified Vital Essential and Desirable
VED analysis used for Spare parts which is classified Vital, Essential and Desirable
3).
Inventory carrying cost for an item depends on
(A).
Purchase cost of the item
(B).
Production cost of the item
(C).
Order cost of the item
(D).
Overstock cost of the item
Solution.
Cc = Inventory Holding cost or Carrying cost = I * Cu
Where I = Percentage of Unit Cost
Cu – Purchase cost of the item or unit cost of the item
4).
Non-moving or ‘dead’ stock determination and control is an important aspect in materials
management of an organization. The main factor affecting the amount of dead stock is
(A).
F-S-N analysis
(B).
Inventory control policy
(C).
Purchasing system
(D).
Waste management system
Solution.
5).
A-B-C classification scheme is recommended when
(A).
Unit price of item needs to be controlled
(B).
Annual demand of the item is less
(C).
Annual usage value is the controlling factor
(D).
Availability of the item is to be ensured
Solution.
ABC always classified based on annual cost occurred
6).
The lead time of EOQ model is
(A).
Infinity
(B).
Zero
(C).
1
(D).
R
Solution.
Lead Time in EOQ model is Zero and (R,Q ) model is greater than Zero
7).
Note: Horizon in EOQ is Infinite
The parameters of P-system of inventory control under uncertainty are determined
considering
(A).
Fluctuations of demand during lead time
(B).
Fluctuations of demand during lead time and fluctuations of lead time
(C).
Fluctuations of demand during lead time and fixed order period
(D).
None of the above
Solution.
P –System: Quantity Ordered will vary ( Depends on demand /consumption in fixed
period) and Fixed Period
Q- System: Ordering Quantity is Fixed. Period varies.
8).
The concept of ‘optimal policy curve’ is used to determine optimality of the present
ordering policy for a given inventory item. Any point on this curve represents a constant
represented by
(A).
Total average inventory × EOQ
(B).
EOQ × safety stock
(C).
Total number or orders × reorder level
(D).
Total average inventory × total number of orders
Solution.
9).
An inventory problem under uncertainty can be converted into a problem under risk
applying
(A).
Savage criterion
(B).
Wald criterion
(C).
Bayes criterion
(D).
All of the above
Solution.
Savage Criterion : Used in Decision Theory
Bayes Criterion : Used in Inventory problems
10).
What is the relationship between service level and safety stock?
(A).
As safety stock increases, service level increases
(B).
As safety stock decreases, service level increases
(C).
As safety stock increases, service level decreases
(D).
As safety stock decreases, service level decreases
Solution.
Safety stock is high, then service level will be high because no backorder cost and
increases value to the firm
11).
Which of the following elements are considered while determining the economic lot size for
1. Inventory carrying cost

2. Procurement cost
3. Set up cost
(A).
1, 2, 3
(B).
1, 2
(C).
2, 3
(D).
1, 3
Solution.
EOQ considers only Co – Setup or Ordering cost and Cc – Inventory carrying or Holding cost
12).
Economic order quantity is the quantity at which the cost of carrying is
(A).
minimum
(B).
equal to cost of ordering
(C).
less than the cost of ordering
(D).
cost of overstocking
Solution.
at EOQ , Total Ordering cost = Total carrying cost
13).
Which one of the following is an inventory system that keeps a running record of the
amount and replenishes the stock when it drops to a certain level by ordering a fixed
quantity?
(A).
EOQ
(B).
Periodic
(C).
Peripheral
(D).
ABC
Solution.
14).
In the EOQ model the unit ordering cost doubled. Then the EOQ will be
(A).
reduced to half
(B).
become two fold
(C).
increase 1.414 times
(D).
decreased 1.414 times
Solution.
EOQ α √ Co
15).
All of the following may be used to find EOQ except
(A).
Optimal number of days supply to order
(B).
Number of orders which minimize ordering costs
(C).
Optimal number of rupees per order
(D).
Optimal number of orders per year
Solution.
EOQ is used to find optimum number of orders, optimum number of days to order
16).
When demand of an item is a variable and lead time is constant, optimal probability of
stockout of the given item in cost-based approach under the assumption of independence
between demand and lead time is dependent on
(A).
Backordering cost and holding cost
(B).
Average yearly demand and holding cost
(C).
Backordering cost, holding cost, and average yearly demand
(D).
Backordering cost, holding cost, average yearly demand, and order quantity
Solution.
Stock out always consider back ordering cost or shortage cost. In addition it considers
Carrying cost or holding cost, EOQ and R
17).
The annual demand of an item is 4000 units. The ordering cost per order is Rs.80, The
Inventory holding cost based on average inventory is 20%, the cost per unit is Rs.5/-. The
Economic Order Quantity will be
(A).
400
(B).
600
(C).
800
(D).
1000
Solution.
18).
If the annual demand of an item becomes half, ordering cost double, holding cost one-
fourth and the unit cost twice, then what is the ratio of the new EOQ and the earlier EOQ?
(A).
½
(B).
1/ √2
(C).
√2
(D).
2
Solution.
19).
Taxes and insurance included in
(A).
Ordering cost
(B).
shortage cost
(C).
purchase cost
(D).
carrying cost
carrying cost
Solution.
Taxed and insurance are classified under Carrying cost. Salary for Store keeper, rent for
store are also classified under carrying cost.
20).
Frequent redesign of products may result i
(A).
High inventory level
(B).
Low inventory level
(C).
Understock situation
(D).
Excess purchase
Solution.
If frequent redesign take place, old inventory stacked without consumption which leads to
High inventory level
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11/22/21, 9:37 PM Sparks Academy Student - Test Series Result

PPC - Inventory Control (1 Marks) Result

Where I = Percentage of Unit Cost

Cu – Purchase cost of the item or unit cost of the item

Q- System: Ordering Quantity is Fixed. Period varies.

EOQ × safety stock

Bayes Criterion : Used in Inventory problems

1. Inventory carrying cost

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