Which of the following statements about abc analysis is false?

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7. Which of the following statements about ABC analysis is
FALSE?

a. ABC analysis is based on the presumption that controlling the
few most important items produces the vast majority of inventory
savings.

b. In ABC analysis, “A” items should have tighter physical
inventory control than “B” or “C” items have.

c. ABC analysis is based on the presumption that all items must
be tightly controlled to produce important cost savings.

d. In ABC analysis, forecasting methods for “C” items may be
less sophisticated than for “A” items.

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e. Criteria other than annual dollar volume, such as high
holding cost or delivery problems, can determine item
classification in ABC analysis.

10. The lot-for-lot lot-sizing technique is particularly
appropriate when holding costs are low and ordering costs are
high.

a. True

b. False

11. Given the following bill of material:

If the demand for product A is 100 units, what will be the gross
requirement for component D? Assume there is a planned order
receipt for 100 of item C.

a. 700

b. 500

c. 0

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d. 3

e. 200

Answer

7) c. ABC analysis is based on the
presumption that all items must be tightly controlled to produce
important cost savings. (This is the only option that is false
regarding the ABC analysis.) ABC analysis clearly states that by
controlling 20% of the issues a major 80% of the problems could be
solves. Hence it is not important to strictly control all the
variants to product important cost saving.

10) a. True (if the ordering cost is
less it is wiser to make orders lot by lot, since it costs nothing
to place an order. Also one cannot place a bulk order since the
holding cost of the inventory is high.

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The gross requirement of component D
is 200


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