Question 1

Current practice is for small businesses to only provide direct credit to customers.

Accepted Answer

Small businesses often use a variety of methods to extend credit to customers, including direct credit, credit cards, and third-party financing options, not just direct credit alone.

Question 2

Assigning a high value to inventory results in increased sales margin and reported profit,but at the price of paying increased income taxes.

Accepted Answer

False

Question 3

Planning,organizing,and staffing are primarily the responsibility of operations management.

Accepted Answer

Planning, organizing, and staffing are primarily the responsibilities of general management, while operations management focuses on the processes that produce goods and services.

Question 4

One of the policies for managing customer credit requires business owners to maintain constant "aging" of accounts to quickly identify customers who become delinquent.

Accepted Answer

This is true. Maintaining an aging of accounts helps identify delinquent customers early on and allows for prompt action to remedy the situation.

Question 5

Short-term assets are also known as operating assets.

Accepted Answer

Short-term assets are more commonly referred to as current assets, not operating assets. Current assets include cash, inventory, and receivables that are expected to be converted into cash within a year. Operating assets can include both current and long-term assets used in the operations of a business.

Question 6

A process is what a business does when it takes some raw material and converts it into a valuable output.This does not apply to service businesses.

Accepted Answer

This statement is false. Service businesses also have processes to create valuable outputs, albeit intangible ones.

Question 7

Economic order quantity (EOQ)is also called reorder point.

Accepted Answer

Economic order quantity (EOQ) and reorder point are two separate concepts in inventory management. EOQ refers to the optimal quantity to order that minimizes total inventory costs, while reorder point refers to the point at which a new order should be placed to ensure sufficient inventory levels.

Question 8

The time value of money is the concept that a dollar received today is worth much more than is a dollar to be received at some time in the future.

Accepted Answer

This statement is true. The time value of money takes into account the fact that money can earn interest or be invested, and therefore a dollar received today is worth more than a dollar received in the future because it has more earning potential.

Question 9

A procedure is specific guidance for completing steps in a process.

Accepted Answer

The answer of A procedure is specific guidance for completing...

Question 10

The three primary inventories of manufacturing are raw materials,work in process,and finished goods.

Accepted Answer

Raw materials are the components that are used in manufacturing a product, work in process refers to the stage where the product is being manufactured, and finished goods are the final products that are ready for sale. These are the three primary inventories of manufacturing.

Question 11

For a small business,the amount and type of inventory held for resale is not important because the supply of inventory and demand of customers can be matched at all times.

Accepted Answer

The amount and type of inventory held for resale is important for a small business as it affects the ability to meet customer demand and maintain profitability. A mismatch of supply and demand can lead to lost sales or excess inventory, both of which can impact the bottom line.

Question 12

If your business is wholesale or retail merchandising,the issues of property,plant,and equipment (PPE)constitute your greatest investments and your greatest costs.

Accepted Answer

In wholesale or retail merchandising businesses, the greatest investments and costs are typically in inventory rather than in property, plant, and equipment (PPE). Inventory costs are central to these types of businesses as they need to purchase goods for resale.

Question 13

Intangibility,inseparability,and perishability are the three characteristics of services that impact operations choices and decision making.

Accepted Answer

Intangibility means that services cannot be touched or seen before they are purchased, which affects marketing and customer perception. Inseparability means that the production and consumption of services happen at the same time, which affects capacity planning and employee training. Perishability means that services cannot be stored or saved for future use, which affects pricing and demand forecasting. These characteristics impact operations choices and decision making for service businesses.

Question 14

All capital assets cause you to incur four costs over time: (1)the cost of acquiring the asset,(2)the cost of owning the asset,(3)the cost of operating the asset,and (4)the cost of disposing of the asset.

Accepted Answer

This statement is true. All capital assets involve these four costs over their lifetime.

Question 15

The total cost of keeping inventory is the sum of the cost to buy the inventory,the cost to store,protect,and maintain inventory,and the cost of making an order to purchase inventory.

Accepted Answer

The total cost of keeping inventory includes the cost to buy the inventory (ordering cost), the cost to store, protect, and maintain inventory (holding cost), and the cost of making an order to purchase inventory (stockout cost). Therefore, the statement is true.

Question 16

Bar coding is used to reduce the cost of perpetual inventory systems.

Accepted Answer

Bar coding enables faster and more accurate tracking of inventory, which in turn reduces the cost associated with maintaining a perpetual inventory system.

Question 17

Factoring receivables to a commercial lender is usually less expensive than pledging receivables.

Accepted Answer

Factoring receivables typically involves selling them at a discount to their face value to a factor (commercial lender), which usually makes it more expensive than pledging receivables as collateral for a loan, where the interest rate applied is generally lower than the discount rate in factoring.

Question 18

A lease is simply a rental agreement that specifies a minimum period of time for which one must make rental payments.

Accepted Answer

This is an accurate statement. A lease is a legally binding agreement between a landlord and a tenant that outlines the terms of renting a property for a specified period of time. Typically, the minimum period of time for a lease is one year, although it can vary depending on the landlord and rental property. During the lease term, the tenant is responsible for paying rent on a regular basis and following the agreed-upon terms and conditions of the lease.

Question 19

An arm's length transaction is a business deal where the parties have a prior relation or affiliation,but where the business is conducted as if they were unrelated.

Accepted Answer

An arm's length transaction is one where the parties act as if they were unrelated, even if they may have had prior connections or affiliations.

Question 20

Disposal value is based on determining the price of either a new asset or a used asset for which there is an organized market.

Accepted Answer

Disposal value typically refers to the estimated selling price of an asset at the end of its useful life, not the price of a new asset or a used asset in an organized market. It is concerned with the value an asset can fetch when it is disposed of or sold, often as scrap or for parts.

Quiz 15: Assets: Inventory and Operations Management