1.

The acquisition of a retail shoe store by a shoe manufacturer is an example of

a. Vertical integration
b. A conglomerate
c. Market extension
d. Horizontal integration
2. A horizontal merger is a merger between
a. Two or more firms from different and unrelated markets.
b. Two or more firms at different stages of the production process.
c. A producer and its supplier.
d. Two or more firms in the same market.
3. A soft drink producer acquiring a bottle manufacturer is an example of a
a. Horizontal merger
b. Vertical merger
c. Congeneric merger
d. Conglomerate merger
4. A shoe manufacturing firm acquiring a brokerage house is an example of a
a. Horizontal merger
b. Vertical merger
c. Congeneric merger
d. Conglomerate merger

Inventory Management
5. The benefits of a just-in-time system for raw materials usually include
a. Elimination of non-value-added operations.
b. Increase in the number of suppliers, thereby ensuring competitive bidding.
c. Maximization of the standard delivery quantity thereby lessening the paperwork for
each delivery.
d. Decrease in the number of deliveries required to maintain production.
6. To determine the inventory reorder point, calculations normally include the
a. Ordering cost
b. Carrying cost
c. Average daily usage
d. Economic order quantity
7. Which of the following is not a correct comparison of a just-in-time system with a traditional
system?
Traditional Just-in-time
a. Longer lead times Shorter lead times
b. Inventory is an asset Inventory is a liability
c. Some scrap tolerated Zero defects desired
d. Lot size based on immediate need Lot size based on formulas
8. Bell Co. changed from a traditional manufacturing philosophy to a just-in-time philosophy. What
are the expected effects of this change on Bell’s inventory turnover and inventory as a
percentage of total assets reported on Bell’s balance sheet?
 Inventory Turnover Inventory percentage
a. Decrease Decrease
b. Decrease Increase
c. Increase Decrease
d. Increase Increase
9. As a consequence of finding a more dependable supplier, Dee Co. reduced its safety stock of raw
materials by 80%. What is the effect of this safety stock reduction on Dee’s economic order
quantity?
a. 80% decrease
b. 64% decrease
c. 20% increase
d. No effect.
10. The economic order quantity formula assumes
a. Periodic demand for the good is known.
b. Carrying costs per unit vary with quantity ordered.
c. Costs of placing an order vary with quantity ordered.
d. Purchase costs per unit differ due to quantity discounts.
11. Firms that maintain very low or no inventory levels
a. Have higher ordering costs.
b. Have higher carrying costs.
c. Have higher ordering and carrying costs.
d. Have lower ordering and carrying costs.
12. An example of a carrying costs is
a. Disruption of production schedules.
b. Quantity discounts lost.
c. Handling costs.
d. Obsolescence.
13. Which of the following is a characteristic of just-in-time (JIT) inventory management systems?
a. JIT users determine the optimal level of safety stocks.
b. JIT is applicable only to large companies.
c. JIT does not really increase overall economic efficiency because it merely shifts
inventory levels further up the supply chain.
d. JIT relies heavily on good quality materials.
14. An appropriate technique for planning and controlling manufacturing inventories such as raw
materials, components and subassemblies whose demand depends on the level of production is
a. Materials requirements planning
b. Regression analysis
c. Capital budgeting
d. Linear programming