NOVEMBER 2013 EXAMINATION DATE: 15 NOVEMBER 2013 DURATION: 2 HOURS PASS MARK: 40% (QT-64)

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1 INVBUS1 NOVEMBER 2013 EXAMINATION DATE: 15 NOVEMBER 2013 TIME: 14H00 16H00 TOTAL: 100 MARKS DURATION: 2 HOURS PASS MARK: 40% (QT-64) INVENTORY MANAGEMENT THIS EXAMINATION PAPER CONSISTS OF 4 SECTIONS: SECTION A: CONSISTS OF: (i) 10 MULTIPLE-CHOICE QUESTIONS (10 MARKS) (ii) 5 TRUE OR FALSE QUESTIONS (10 MARKS) (iii) 10 MATCHING-STATEMENT QUESTIONS (10 MARKS) SECTION B: SECTION C: SECTION D: CONSISTS OF 3 SHORT QUESTIONS CONSISTS OF 3 LONG ANSWER QUESTIONS CONSISTS OF 3 INTERPRETATIVE QUESTIONS ANSWER ANY ONE OF THE QUESTIONS (10 MARKS) (40 MARKS) (20 MARKS) INSTRUCTIONS: 1. Read the following instructions carefully before answering the paper, as failure to act upon them will result in a loss of marks. 2. Write your answers in your answer book, which is provided in the exam. 3. Ensure that your name and student number are clearly indicated on your answer book. 4. Write your answers in either blue or black ink in your answer book. 5. Read each question very carefully before you answer it and number your answers exactly as the questions are numbered. 6. Begin with the question for which you think you will get the best marks. 7. Note the mark allocations for each question give enough facts to earn the marks allocated. Don't waste time by giving more information than required. 8. You are welcome to use diagrams to illustrate your answers. 9. Please write neatly we cannot mark illegible handwriting. 10. Any student caught cheating will have his or her examination paper and notes confiscated. The College will take disciplinary measures to protect the integrity of these examinations. 11. If there is something wrong with or missing from your exam paper or your answer book, please inform your invigilator immediately. If you do not inform your invigilator about a problem, the College will not be able to rectify it afterwards, and your marks cannot be adjusted to allow for the problem. 12. This paper may be removed from the examination hall after the examination has taken place. DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 1 OF 7

2 SECTION A (30 MARKS) (i) MULTIPLE-CHOICE QUESTIONS Choose the correct option for each of the following. Write only the question number and your chosen answer. For instance, if you think that the correct answer for number 1 is, then write it as Which of the following is a simplified ordering method? group re-order points visual review method individual item reorder point determining order quantities 2. Under what circumstances may hedging stock be purchased? if items concerned have very short lead times if there is a predicted price decrease for a particular raw material if there is an upcoming labour strike in a supplier industry if conditions are normal in the supplier's industry 3. In which way can inventory become obsolete? through damage through pilferage through technical obsolescence All of the above. 4. What problems may arise in using the visual review method? The periodic review of stock levels may be neglected. Counting can become inaccurate if housekeeping is poor. The method may become unrealistic if demand changes. All of the above. 5. Which items are C-items in the ABC classification system? items that have not moved in the past six months slow-moving items fast-moving items fast-moving items required on a weekly basis DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 2 OF 7

3 6. Where does the revenue of a company come from? the ordering of raw materials the cost of production the sale of goods and services administration expenses 7. How do we calculate the income of a firm? income = revenue + expenses income = revenue - expenses income = revenue / expenses income = revenue * expenses 8. Which inventory valuation method holds that inventory received first must be issued first? FIFO LIFO standard cost average cost 9. Which cost is used for inventory management decisions? carrying cost ordering cost stockout cost All of the above. 10. Which of the following is a category of inventory carrying costs? manufacturing costs loss of sales risk costs replacement costs [10] (ii) TRUE OR FALSE QUESTIONS Indicate whether the following statements are True or False. Motivate all your answers. 1. In the re-order point methods, the order quantity is fixed. 2. Assets = liabilities owner's equity. 3. The main objective of packaging is to protect the product. 4. Spare parts constitute component stock inventories. 5. Production planning is concerned with overall inventory. [5 2 = 10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 3 OF 7

4 (iii) MATCHING-STATEMENT QUESTIONS Match the statements in Column B to the statements in Column A. Write down the answers only, for example 1.. Column A Column B 1. pipeline stock lot size stock 2. asset fixed order quantity 3. cycle stock something of value, expected to benefit a company 4. liability expenses to a company 5. cycle counting (e) money owed by a company 6. inventory checked at intervals (f) lot for lot 7. MRO supplies (g) perpetual inventory 8. discrete method of ordering (h) transportation stock 9. manufacturing inventory (i) periodic inventory 10. demand-based method of ordering (j) short-term asset to a company [10] [30] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 4 OF 7

5 SECTION B: SHORT QUESTIONS (10 MARKS) QUESTION 1 Define 'unitisation'. [2] QUESTION 2 Define a 'forecast'. [2] QUESTION 3 i. What is a standard order quantity? (1) ii. Define 'logistics'. (2) Define 'customer service' in relation to inventory management. (3) [6] [10] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 5 OF 7

6 SECTION C: LONG ANSWER QUESTIONS (40 MARKS) QUESTION 1 Briefly explain the two demand-based methods of ordering. (2 2 = 4) Name three various demand patterns and give a brief explanation of each. (3 2 = 6) [10] QUESTION 2 Outline any five costs of carrying inventory. [5 2 = 10] QUESTION 3 i. Discuss the importance of keeping track of inventory. (5) ii. Distinguish between a common and a contract carrier. (5) Name and briefly describe five activities required in the area of physical distribution. (5 2 = 10) [20] [40] DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 6 OF 7

7 SECTION D: INTERPRETATIVE QUESTIONS (20 MARKS) ANSWER ANY ONE OF THE QUESTIONS QUESTION 1 Name and briefly describe five uses of ABC classification in managing inventory. (5 2 = 10) Give five costs of record error and briefly explain each one. (5 2 = 10) [20] OR QUESTION 2 Describe the five modes of transport. [20] OR QUESTION 3 i. Discuss the advantages of using pre-assigned locations. (5) ii. Discuss the advantages of using random locations. (5) Identify and explain five ways in which unwanted inventory can be reduced. (5 2 = 10) [20] [20] Section A: 30 marks Section B: 10 marks Section C: 40 marks Section D: 20 marks TOTAL: 100 MARKS DAMELIN CORRESPONDENCE COLLEGE NOVEMBER 2013 PAGE 7 OF 7