JUNE 2012 EXAMINATION DATE: 15 JUNE 2012 DURATION: 2 HOURS PASS MARK: 40% (QT-64)

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1 INVBUS1 JUNE 2012 EXAMINATION DATE: 15 JUNE 2012 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 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. NOTE: YOU MAY USE A NON-PROGRAMMABLE CALCULATOR. DAMELIN CORRESPONDENCE COLLEGE JUNE 2012 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 these best describe the responsibility of inventory management? planning and controlling inventory planning inventory controlling inventory warehousing 2. Master scheduling is concerned with: overall inventory. component parts. end items. raw materials. 3. Semi-finished assembled items are also known as: finished goods. work in process. distribution inventory. component stock. 4. Types of inventory describe: the physical characteristics of inventory. the purpose of inventory. the nature of inventory. purpose and physical characteristics. 5. Inventory purchased in anticipation of an event is known as: decoupling stock. hedging stock. pipeline stock. anticipation stock. DAMELIN CORRESPONDENCE COLLEGE JUNE 2012 PAGE 2 OF 7

3 6. Which strategy provides for production to remain at a constant, with inventory varying around demand? chase strategy level production strategy hybrid strategy subcontracting 7. The relationship between assets, liabilities and owner's equity is expressed by the following balance sheet equation: assets = liabilities owner's equity assets = liabilities / owner's equity assets = owner's equity assets = liabilities + owner's equity 8. An inventory pricing method where the issue price is recalculated after each receipt, taking into account both quantities and money value, is called: standard cost system. first in, first out. average cost system. last in, first out. 9. Inventory can be conveniently classified into: four categories. three categories. five categories. two categories. 10. Inventory can be reduced by: reducing the number of stocking points. smooth flow from supplier to customer. transportation efficiencies. All of above. [10] (ii) TRUE OR FALSE QUESTIONS Choose whether the following are True or False. Motivate all your answers. 1. The acronym MRO is commonly used for maintenance, repair and operating. 2. Goods moved in small quantities cost less to move per unit. 3. The cost of placing an order depends on the quantity ordered. 4. Cycle counting occurs continuously with experienced employees. 5. The fewer items in stock, the easier it is to manage them. [5 2 = 10] DAMELIN CORRESPONDENCE COLLEGE JUNE 2012 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. raw materials the ability of a company to satisfy the needs of its customers 2. finished goods a system that does not keep track of issue and disbursement of items 3. strategic stock this technique is often used when materials are received, converted into deliverable form, and shipped within a very short period of time 4. four-wall system a strategy that combines the best of two strategies 5. periodic system (e) a performance measure 6. a reason for obsolescence (f) products we produce, ready to be delivered to our customers through a distribution network 7. a hybrid (g) minimise cost and maximise customer service 8. return on investment (h) a major factor in determining a company's ability to manufacture 9. customer service (i) this is stock usually held, and it is stock borne by the government 10. a warehouse objective (j) deterioration [10] [30] DAMELIN CORRESPONDENCE COLLEGE JUNE 2012 PAGE 4 OF 7

5 SECTION B: SHORT QUESTIONS (10 MARKS) QUESTION 1 Define inventory. [2] QUESTION 2 List three types of inventory. [3] QUESTION 3 i. What is customer service? (1) ii. State two customer service objectives. (2) Explain why it is important that inventory is accounted for. (2) [5] [10] DAMELIN CORRESPONDENCE COLLEGE JUNE 2012 PAGE 5 OF 7

6 SECTION C: LONG ANSWER QUESTIONS (40 MARKS) QUESTION 1 Briefly explain five functions of inventory. (5) Distinguish between a perpetual inventory system and a periodic inventory system. (5) [10] QUESTION 2 Describe three production strategies. [10] QUESTION 3 i. State five warehouse objectives. (5) ii. Briefly explain five consequences of inaccurate records. (5) Name and briefly describe five uses of ABC classification in managing inventory. (5 2 = 10) [20] [40] DAMELIN CORRESPONDENCE COLLEGE JUNE 2012 PAGE 6 OF 7

7 SECTION D: INTERPRETATIVE QUESTIONS (20 MARKS) ANSWER ONE OF THE QUESTIONS QUESTION 1 Distinguish between FIFO and LIFO inventory pricing systems. (10) Given the following annual costs, calculate the average cost of placing one order. Production control salaries = R Supplies and operating expenses for production control department = R Cost of setting up work centres for an order = R120 Orders placed each year = (10) [20] OR QUESTION 2 Discuss three main manufacturing strategies. [20] OR QUESTION 3 i. Briefly explain five methods for reducing inventory. (5) ii. Briefly explain the benefits of lot size reduction. (5) Compare cycle counting and periodic inventory. You may use table format. (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 JUNE 2012 PAGE 7 OF 7