Types of Inventory: A Comprehensive Guide for Supply Chain Management

Question 1

Which inventory type consists of completed products awaiting sale?

Accepted Answer

Finished goods

Answer

Raw materials

Answer

Work-in-process

Answer

Safety stock

Question 2

Inventory serving as a buffer against demand or supply fluctuations is known as:

Accepted Answer

Safety stock

Answer

Buffer stock

Answer

Cycle stock

Answer

Core stock

Question 3

Which inventory management strategy aims to minimize inventory levels?

Accepted Answer

Just-in-time (JIT)

Answer

Economic order quantity (EOQ)

Answer

Materials requirement planning (MRP)

Answer

Distribution requirements planning (DRP)

Question 4

The discrepancy between physical inventory count and inventory records is termed:

Accepted Answer

Discrepancy

Answer

Shrinkage

Answer

Variance

Answer

Shortage

Question 5

Inventory classification based on its production role is known as:

Accepted Answer

Functional classification

Answer

Physiological classification

Answer

ABC classification

Answer

VED classification

Question 6

Which inventory control technique triggers replenishment orders based on a threshold?

Accepted Answer

Fixed order quantity

Answer

Periodic review

Answer

Two-bin system

Answer

First-in, first-out (FIFO)

Question 7

Which cost is associated with maintaining excess inventory?

Accepted Answer

Carrying cost

Answer

Ordering cost

Answer

Shortage cost

Answer

Procurement cost

Question 8

Clearly differentiate between dependent and independent demand in inventory management. Provide a specific example for each.

Accepted Answer

Dependent demand is driven by external factors like customer orders, while independent demand is influenced by internal factors like production schedules.

Answer

Independent demand experiences greater volatility than dependent demand.

Answer

Dependent demand solely pertains to the demand for finished goods, and independent demand solely pertains to the demand for raw materials.

Answer

Dependent and independent demand are interchangeable concepts in inventory management.

Question 9

Which type of inventory represents materials that have been ordered but not yet received by the company?

Accepted Answer

Raw materials

Answer

Work-in-process

Answer

Safety stock

Answer

Finished goods

Question 10

Work-in-process (WIP) inventory includes:

Accepted Answer

Materials that have been partially processed

Answer

Materials that have been fully processed

Answer

Materials that are ready to be shipped

Answer

Materials that are waiting to be ordered

Question 11

Which type of inventory serves as a buffer against unexpected demand fluctuations or supply disruptions?

Accepted Answer

Safety stock

Answer

Raw materials

Answer

Work-in-process

Answer

Finished goods

Question 12

Finished goods inventory typically includes:

Accepted Answer

Products that have been manufactured and are ready to be sold

Answer

Products that are still being produced

Answer

Products that are awaiting delivery to customers

Answer

Products that have been returned by customers

Question 13

The primary purpose of maintaining safety stock is to:

Accepted Answer

Prevent stockouts

Answer

Ensure continuous production or operations

Answer

Reduce carrying costs

Answer

Maximize customer satisfaction

Question 14

Which inventory management technique involves categorizing inventory items based on their usage and importance?

Accepted Answer

ABC analysis

Answer

VED analysis

Answer

SDE analysis

Answer

XYZ analysis

Question 15

The overall objective of inventory management is to:

Accepted Answer

Minimize total inventory costs while meeting customer demand

Answer

Maximize inventory levels

Answer

Reduce lead times

Answer

Improve customer service only

Question 16

Which type of inventory refers to goods ready for sale to customers?

Accepted Answer

Finished goods

Answer

Raw materials

Answer

Work-in-progress

Answer

Safety stock

Question 17

Which of the following is NOT a type of inventory?

Accepted Answer

Emergency stock

Answer

Raw materials

Answer

Work-in-progress

Answer

Finished goods

Question 18

Which type of inventory acts as a buffer to protect against unexpected changes in demand?

Accepted Answer

Safety stock

Answer

Raw materials

Answer

Finished goods

Answer

Work-in-progress

Question 19

Work-in-process inventory represents:

Accepted Answer

Goods partially completed but not yet ready for sale

Answer

Goods ready to be sold to customers

Answer

Goods used directly in the production process

Answer

Goods held as a buffer against demand fluctuations

Question 20

Which type of inventory is used to meet unexpected demand during periods of high demand?

Accepted Answer

Safety stock

Answer

Raw materials

Answer

Finished goods

Answer

Work-in-progress

Question 21

Which inventory type acts as a buffer against unexpected changes in demand or supply?

Accepted Answer

Safety stock

Answer

Raw materials

Answer

Work-in-process

Answer

Finished goods

Question 22

Which inventory type serves as a buffer against unforeseen demand or supply fluctuations?

Accepted Answer

Safety stock

Answer

Raw materials

Answer

Work-in-process

Answer

Finished goods

Question 23

Which type of inventory serves as a buffer to minimize the effects of unexpected demand or supply disruptions?

Accepted Answer

Safety stock

Answer

Raw materials

Answer

Work-in-process

Answer

Finished goods

Question 24

Which inventory type acts as a buffer against unexpected demand increases or supply chain disruptions?

Accepted Answer

Safety stock inventory

Answer

Raw materials inventory

Answer

Work-in-process inventory

Answer

Finished goods inventory

Question 25

Which type of inventory comprises items undergoing transformation in the production process?

Accepted Answer

Work-in-process

Answer

Finished goods

Answer

Raw materials

Answer

Safety stock

Question 26

What is the primary function of safety stock inventory?

Accepted Answer

To mitigate unforeseen demand surges or supply chain disruptions

Answer

To facilitate uninterrupted production

Answer

To minimize production costs

Question 27

True or False: Finished goods inventory can serve to fulfill urgent customer orders.

Accepted Answer

True

Answer

Question 28

Which inventory management technique involves maintaining only enough inventory to meet immediate demand?

Accepted Answer

Just-in-time

Answer

Periodic inventory system

Answer

Economic order quantity

Answer

Material requirements planning

Question 29

Which of the following factors does NOT contribute to inventory carrying costs?

Accepted Answer

Production rate

Answer

Insurance

Answer

Capital costs

Answer

Storage space

Question 30

True or False: Inventory turnover ratio measures the frequency with which inventory is sold and replaced over a specified period.

Accepted Answer

True

Answer

Question 31

What is a major benefit of a periodic inventory system?

Accepted Answer

Reduced labor costs and increased flexibility in inventory counting

Answer

Provision of real-time inventory data

Answer

Elimination of manual inventory counting

Question 32

Which type of inventory comprises raw materials that have not yet undergone any processing?

Accepted Answer

Raw materials

Answer

Decoupling inventory

Answer

Work-in-process

Answer

Finished goods

Question 33

Inventory that is in the process of being manufactured or assembled is classified as:

Accepted Answer

Work-in-process

Answer

Transit inventory

Answer

Finished goods

Answer

Safety stock

Question 34

What type of inventory represents products that are ready to be sold to customers?

Accepted Answer

Finished goods

Answer

Safety stock

Answer

Work-in-process

Answer

Raw materials

Question 35

What is the primary purpose of holding safety stock inventory?

Accepted Answer

To provide a buffer against unexpected fluctuations in demand or supply

Answer

To reduce storage costs

Answer

To increase the efficiency of production processes

Question 36

Inventory that is held in anticipation of future price increases is known as:

Accepted Answer

Speculative inventory

Answer

Seasonal inventory

Answer

Anticipation inventory

Question 37

Which inventory type is designed to meet demand during periods of seasonal fluctuations?

Accepted Answer

Seasonal inventory

Answer

Safety stock

Answer

Cycle inventory

Question 38

What is the main difference between cycle inventory and safety stock inventory?

Accepted Answer

Cycle inventory is used to meet regular demand, while safety stock is held as a buffer against unexpected fluctuations.

Answer

Cycle inventory is larger than safety stock.

Question 39

Which of the following is NOT a benefit of holding safety stock inventory?

Accepted Answer

Reduced production costs

Answer

Improved customer service

Answer

Increased flexibility in production planning

Answer

Protection against supply chain disruptions

Question 40

What is the formula for calculating the average inventory level?

Accepted Answer

(Beginning inventory + Ending inventory) ÷ 2

Answer

Beginning inventory - Ending inventory

Answer

(Beginning inventory + Ending inventory) × 2

Answer

Ending inventory ÷ Beginning inventory

Question 41

Which type of inventory is purchased to mitigate the risk of stockouts during periods of high demand?

Accepted Answer

Safety stock

Answer

Anticipation stock

Answer

Cycle stock

Answer

Buffer stock

Question 42

Which type of inventory is the stock of goods that have yet to be completed?

Accepted Answer

Work-in-process

Answer

Finished goods

Answer

Buffer stock

Answer

Raw materials

Question 43

Which type of inventory is the stock of goods that are available for sale to customers?

Accepted Answer

Finished goods

Answer

Safety stock

Answer

Raw materials

Answer

Anticipation stock

Question 44

Which type of inventory is the stock of goods used to create finished products?

Accepted Answer

Raw materials

Answer

Safety stock

Answer

Cycle stock

Answer

Anticipation stock

Question 45

Which of the following is NOT a factor that influences optimal inventory levels?

Accepted Answer

Exchange rates

Answer

Demand variability

Answer

Storage capacity

Answer

Safety stock

Question 46

Which of the following is a benefit of carrying high levels of safety stock?

Accepted Answer

Reduced risk of stockouts

Answer

Improved cash flow

Answer

Lower storage costs

Answer

Increased inventory turnover

Question 47

Which inventory management technique classifies items based on their annual usage value?

Accepted Answer

ABC analysis

Answer

First-in, first-out

Answer

Economic order quantity

Answer

Just-in-time

Question 48

Which of the following is a drawback of holding low levels of safety stock?

Accepted Answer

Increased risk of stockouts

Answer

Reduced inventory carrying costs

Answer

Improved customer service

Answer

Lower risk of obsolescence

Question 49

Which type of inventory is held to meet anticipated increases in demand due to seasonality or promotions?

Accepted Answer

Anticipation stock

Answer

Buffer stock

Answer

Cycle stock

Answer

Safety stock

Question 50

A manufacturing company produces widgets. Which type of inventory represents partially assembled widgets awaiting the final component?

Accepted Answer

Work-in-process inventory

Answer

Safety stock inventory

Answer

Finished goods inventory

Answer

Raw materials inventory

Question 51

A retailer keeps a surplus of popular winter jackets in its warehouse to prevent stockouts during the peak season. This extra inventory is known as:

Accepted Answer

Safety stock inventory

Answer

Work-in-process inventory

Answer

Raw materials inventory

Answer

Finished goods inventory

Question 52

A bakery has a large supply of flour, sugar, and eggs, ready to be used in baking. This inventory is categorized as:

Accepted Answer

Raw materials inventory

Answer

Safety stock inventory

Answer

Finished goods inventory

Answer

Work-in-process inventory

Question 53

A company holding a large quantity of unsold products due to a sudden drop in demand is experiencing an increase in:

Accepted Answer

Finished goods inventory

Answer

Raw materials inventory

Answer

Work-in-process inventory

Question 54

Which type of inventory is specifically designed to buffer against unexpected disruptions in the supply chain?

Accepted Answer

Safety stock inventory

Answer

Finished goods inventory

Answer

Raw materials inventory

Answer

Work-in-process inventory

Question 55

A company that manufactures custom-made furniture would likely have a higher proportion of which type of inventory compared to a company producing standardized furniture?

Accepted Answer

Work-in-process inventory

Answer

Raw materials inventory

Answer

Finished goods inventory

Answer

Safety stock inventory

Question 56

Which type of inventory is most directly affected by fluctuations in customer demand?

Accepted Answer

Finished goods inventory

Answer

Safety stock inventory

Answer

Raw materials inventory

Answer

Work-in-process inventory

Question 57

A company implements a just-in-time (JIT) inventory system. What impact does this have on overall work-in-process inventory levels?

Accepted Answer

Decrease

Answer

No change

Answer

Unpredictable

Answer

Increase

Question 58

A company experiences frequent delays in receiving raw materials due to unreliable suppliers. Which type of inventory might they consider increasing?

Accepted Answer

Safety stock inventory

Answer

Raw materials inventory

Answer

Work-in-process inventory

Question 59

A company decides to increase its safety stock levels for a particular product. What is the primary reason for this decision?

Accepted Answer

To mitigate the risk of stockouts due to demand fluctuations or supply chain disruptions

Answer

To increase the speed of production processes

Answer

To reduce overall inventory holding costs