Chapter 3:

3.2 Multiple Choice Questions

1) Katz reports total revenue of $245,600, cost of goods sold of $18,950 and net income of
$121,000. Their total assets are $585,000 and total liabilities are $250,000. What is their
return on equity (ROE)?
A) 36.12% B) 48.40% C) 20.68% D) 41.98%
2) Katz reports total revenue of $375,650, cost of goods sold of $267,400 and net income
of $48,325. Their total assets are $784,325 and total liabilities are $387,775. What is their
return on equity (ROE)?
A) 33.72% B) 12.19% C) 6.16% D) 21.38%
3) Which of the following would result in lower return on assets for Katz if all other
entries in their selected financial data were held constant?
A) A reduction in earnings before interest and taxes B) An increase in asset turnover
C) A reduction in total assets D) An increase in profit margin
4) Which of the following would result in an improvement in the C2C cycle for Katz if all
other entries in their selected financial data were held constant?
A) An increase in accounts payable turnover B) An increase weeks payable
C) An increase in weeks receivable D) An increase in weeks in inventory
5) Geoff strolled into his local big box retailer in search of sunflower seeds for the flock
of cardinals that graced his property during the cold winter. Much to his (and the
cardinals') dismay, the shelf where the 50 pound bags of sunflower seeds were kept was
bare. He pirouetted and left the store in disgust, empty-handed and fearing the wrath of
an angry flock of cardinals when he returned home. This sad scenario illustrates
A) safety inventory. B) cycle inventory. C) a markdown. D) a lost sale.
6) Why would anyone in their right mind buy a brand new car in the spring when they
know that new car models will appear in late summer and early fall and the dealers will
use
A) markdowns to move that old inventory?
B) information systems to move that old inventory?
C) pull systems to move that old inventory?
D) lost sales to move that old inventory?

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7) The places in the supply chain network where product is stored, assembled, or
fabricated are known as
A) facilities. B) inventory. C) transportation. D) information.
8) All raw materials, work in process, and finished goods within a supply chain are
known as
A) facilities. B) inventory. C) transportation. D) information.
9) Moving inventory from point to point in the supply is known as
A) facilities. B) inventory. C) transportation. D) information.
10) The data and analysis concerning facilities, inventory, transportation, and customers
throughout the supply chain is known as
A) facilities. B) inventory. C) transportation. D) information.
11) The two major types of facilities are
A) distribution sites and storage sites. B) production sites and distribution sites.
C) production sites and storage sites. D) retail sites and distribution sites.
12) Which component of the supply chain decision-making framework would be
established first?
A) Customer strategy B) Supply chain strategy
C) Supply chain structure D) Competitive strategy
13) Which component of the supply chain decision-making framework would be used to
reach the performance level dictated by the supply chain strategy?
A) Customer strategy B) Supply chain strategy
C) Supply chain structure D) Competitive strategy
14) Which of the following is a characteristic of a facility with excess capacity?
A) Will likely be more efficient per unit of product it produces than one with a lot of unused
capacity
B) Would be very flexible and respond to wide swings in the demands placed on it
C) Would be considered a high utilization facility
D) Will have difficulty responding to demand fluctuations

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15) Which of the following would be a characteristic of a facility with little excess
capacity?
A) Allows a facility to be very flexible and to respond to wide swings in the demands placed
on it
B) Costs money and therefore can decrease efficiency
C) Requires proximity to customers and the rest of the network
D) Will likely be more efficient per unit of product it produces
16) The warehousing methodology that uses a traditional warehouse to store all of one
type of product together is
A) warehouse unit storage. B) stock keeping unit (SKU) storage.
C) job lot storage. D) cross-docking.
17) The warehousing methodology in which all the different types of products needed to
perform a particular job or satisfy a particular type of customer are stored together is
A) warehouse unit storage. B) stock keeping unit (SKU) storage.
C) job lot storage. D) cross-docking.
18) The following warehousing methodology is one in which goods are not actually
warehoused in a facility. Instead, trucks from suppliers, each carrying a different type of
product, deliver goods to a facility. There the inventory is broken into smaller lots and
quickly loaded onto storebound trucks that carry a variety of products, some from each
of the supplier trucks.
A) Warehouse unit storage B) Stock keeping unit (SKU) storage
C) Job lot storage D) Cross-docking
19) The average amount of inventory used to satisfy demand between receipt of supplier
shipments is referred to as
A) cycle inventory. B) safety inventory.
C) seasonal inventory. D) sourcing.
20) The inventory that is built up to counter predictable variability in demand is called
A) cycle inventory. B) safety inventory.
C) seasonal inventory. D) sourcing.

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21) The inventory held in case demand exceeds expectation in order to counter
uncertainty is called
A) cycle inventory. B) safety inventory.
C) seasonal inventory. D) sourcing.
22) The set of business processes required to purchase goods and services is known as
A) cycle inventory. B) safety inventory.
C) seasonal inventory. D) sourcing.
23) Cycle inventory is used because
A) the world is perfectly predictable.
B) demand is uncertain and may exceed expectations.
C) it involves making a trade-off between the costs of having too much inventory and the costs
of losing sales due to not having enough inventory.
D) it focuses on processes that are external to the firm.
24) Seasonal inventory should be used when
A) a company can rapidly change the rate of its production system at a very low cost.
B) changing the rate of production is expensive (e.g., when workers must be hired or fired).
C) adjusting to a period of low demand without incurring large costs.
D) the world is perfectly predictable.
25) Which of the following are key components of transportation decisions when
designing and operating a supply chain?
A) Software selection B) Mode of transportation
C) Source selection D) Warehouse selection
26) Although faster transportation is more expensive, a firm receives which benefit as a
result of the faster transportation?
A) Fewer rejects B) Higher profit
C) Lower inventories D) More warehouses

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28) Blue Nile is an online retailer of diamonds that has used responsive transportation to
ship diamonds to customers in the United States, Canada, and several countries in
Europe and Asia. Which is the mode of transportation used with this strategy?
A) Sea B) Rail C) Internet D) Air
29) Which of the following are key components of information that must be analyzed to
increase efficiency and improve effectiveness in a supply chain?
A) Software selection B) Source selection
C) Warehouse selection D) Forecasting and aggregate planning
30) When all the different stages of a supply chain work toward the objective of
maximizing total supply chain profitability, rather than each stage devoting itself to its
own profitability without considering total supply chain profit, it is known as
A) supply chain coordination. B) forecasting.
C) aggregate planning. D) revenue management.
31) The art and science of making projections about what future demand and conditions
will be is
A) supply chain coordination. B) forecasting.
C) aggregate planning. D) revenue management.
32) Transforming forecasts into plans of activity to satisfy the projected demand is
known as
A) supply chain coordination. B) forecasting.
C) aggregate planning. D) revenue management.
33) The process by which a firm decides how much to charge customers for its goods and
services is
A) supply chain coordination. B) forecasting.
C) aggregate planning. D) pricing.
34) The use of differential pricing over time or customer segments to maximize profits
from a limited set of supply chain assets is
A) supply chain coordination. B) forecasting.
C) aggregate planning. D) revenue management.

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35) Which of the following is a technology that shares and analyzes information in the
supply chain?
A) Internet B) Enterprise Data Planning (EDP)
C) Electronic Resource Interchange (ERI) D) Chain Management (CM) software
36) ________ identifies the difference between the planned production/inventories and
the actual values.
A) Supplier reliability B) Forecast error
C) Variance from plan D) Supply quality
37) In the textbook, it mentions that Walmart has mandated the use of a specific technology by
its top 100 suppliers at the level of product cases. What is the technology?
A) RFID B) ERP C) SCM D) EDI
38) ________ typically measures the cost of bringing product into a facility as a
percentage of sales or cost of goods sold (COGS).
A) Average outbound transportation cost B) Average inbound transportation cost
C) Average incoming shipment size
D) Average inbound transportation cost per shipment
39) ________ measures the average time between when an order is placed and the
product arrives.
A) Supplier reliability B) Supply lead time
C) Fraction of on-time deliveries D) Supply quality
40) Zara sources basic products such as white t-shirts from low cost countries because
demand is predictable. For trendy products for which demand is unpredictable, Zara
sources from companyowned higher cost factories in Europe. For the predictable
demand, Zara strives for ________ and for the unpredictable demand, Zara hopes to
achieve ________.
A) social responsibility, quality B) flexibility, social responsibility
C) efficiency, flexibility D) quality, efficiency
41) The most significant sourcing decision for a firm is
A) whether to locate a plant close to customers or locate a plant close to sources of raw
materials or suppliers.

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B) whether to use highly automate processes or manual labor.
C) whether to use traditional inventory methods or adopt a just in time approach to stocking.
D) whether to perform a task in-house or outsource it to a third party.
42) Lisa rented her goats out to anyone interested in clearing underbrush the natural
way on their acreage. She received a call from her client Mary on June 21 and delivered
her herd of goats to the site on June 24. The goats were done on June 30 and Lisa
presented Mary with an invoice the same day. Mary wrote Lisa a check on July 18 and
Lisa cashed it on July 21. What was Lisa's days payable outstanding for Mary's job?
A) 18 days B) 24 days C) 27 days D) 30 days
44) The ________ strategy results in a peak during the discount week, often followed by a
steep drop in demand during the following weeks.
A) Everyday low pricing B) High-low pricing
C) Fixed price D) Menu pricing
45) ________ measures the incremental costs that are independent of the size of the
order.
A) Average sale price B) Incremental variable cost per unit
C) Incremental fixed cost per order D) Incremental indirect cost per order
46) Economies of scale are illustrated by
A) a company declaring that they will not have sales, but will maintain very low prices all the
time.
B) the price of a taxi ride service increasing after 2 a.m.
C) a supplier using a third party logistics firm.
D) a supplier waiting until enough demand has built up to send a full truckload shipment to
their customer.
50) Amazon uses different prices for the products that are purchased from the company
— often for the speed of the shipping. What is the name of this pricing scheme?
A) Everyday low pricing B) High-low pricing
C) Fixed price D) Menu pricing