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Exam 2-Ch. 12

What is the process by which a retailer attempts to offer the right quantity of the right merchandise at the right time, while meeting the company’s financial goals?
A. Category management
B. Quick response inventory management
C. Merchandise management
D. Inventory control
E. Materials procurement and handling
C
The highest classification level in the buying organization is called:
A. the category group
B. the buying group
C. the retail group
D. the merchandise group
E. the division group
D
The second highest level in the merchandise classification structure is ______________.
A. the SKU
B. the category
C. the department
D. the merchandise group
E. the classification
C
Which of the following does NOT describe the department in the merchandise classification scheme?
A. It is the second level in the merchandise classification scheme
B. It is a lower level than the merchandise group in the merchandise classification scheme
C. It is a level higher than classification
D. The DMM, who manages the department, is responsible for several merchandise classifications
E. It is managed by a general merchandise manager (GMM)
E
Buyers of Toddler’s, Infant’s Little Boy’s and Preteen accessories would directly report to which of the following?
A. DMM of young men’s apparel
B. DMM of children’s apparel
C. DMM of intimate apparel
D. SRVP of men’s, children’s and intimate apparel
E. GMM
B
_________ is a group of items targeting the same customer type, such as girls’ size 4 to 6.
A. the SKU
B. the department
C. the merchandise group
D. the classification
D
Which of the following is an example of a classification?
A. sweaters
B. infants
C. Polo
D. women’s wear
E. White houses with long sleeves
B
Which of the following best describes a category?
A. an assortment of SKUs that the customer sees as reasonable substitutes for each other
B. the smallest unit available for keeping inventory
C. the unit of inventory least affected by seasonal trends
D. the largest unit available for keeping inventory
E. an assortment of complementary SKUs
A
Which of the following is NOT true of the merchandise classification scheme?
A. A Stocking-Keeping Unit (SKU) is the smallest unit available for inventory control.
B. In soft goods, a SKU usually means a particular size, color, and style.
C. A SKU is the basic unit of analysis for making merchandising management decisions.
D. The highest classification level is the merchandise group.
E. A classification is a group of items targeting the same customer type.
C
Which of the following is the correct order describing the levels of the merchandise classification scheme from the highest level to the lowest level?
A. Department-Merchandise Group-Classification-Category-SKU
B. Merchandise Group-Classification-Department-Category-SKU
C. Merchandise Group-Department-Classification-Category-SKU
D. Classification-Department-Category-Merchandise Group-SKU
E. Category-Classification-Merchandise Group-Department-SKU
C
Which of the following is NOT an example of a SKU?
A. Leggs pantyhose size B, navy, reinforced toe
B. Teen necklaces w/ matching bracelets and rings
C. Queen size Sealy mattress w/ extra back support and Scotch Guard
D. No-ad sunscreen, SPF 50 in 50 ounce squeeze top dispenser
E. V-8 vegetable juice in 32 fluid ounce can
B
The _________ is the basic unit of analysis for making merchandise management decisions.
A. assortment
B. SKU
C. classification
D. variety
E. merchandise category
E
The 3-letter acronym “SKU” stands for ____________.
A. Stock Kept Universal
B. Stock Keeping Unit
C. Stock Keyboard Utility
D. Stock Knowledge Union
E. Stock Keystone Undercharge
B
Which of the following is NOT true about category management?
A. Managing merchandise w/i a category by brand can lead to inefficiencies b/c it fails to consider the interdependencies btwn SKUs in the category.
B. The category management approach to managing breakfast cereals in supermarkets should have one buyer or category manager who oversees all merchandising activities for the entire category.
C. A category manager ensures that the store’s assortment includes the “best” combination of sizes and vendors.
D. A category manager chooses vendors that will get the most profit from the allocated space.
E. A category manager is also called a category captain, and they work with vendors to get the most profit from collaborative relationships.
E

(A category captain is the vendor who works with the retailer to develop a better understanding of customer behavior, create assortments that satisfy consumer needs, and improve the profitability of the merchandise category.)

Which of the following is a vendor who forms an alliance w/ a retailer to help gain consumer insight, satisfy customer needs and improve performance and profit across a category?
A. assortment supervisor
B. category captain
C. category manager
D. category specialist
E. consumer advocate
B
What is a drawback of utilizing a category captain?
A. Vendors could take advantage of their position and maximize their own sales
B. Retailers tend to ignore vest practices advice.
C. Retailers take advantage of the information and test legal limits.
D. Retailers can take advantage of their position and minimize competing brands.
E. There are no drawbacks to utilizing a category captain.
A
Why can a vendor [be] in a better position to manage a category than a smaller retailer?
A. Retailers manage brands more often than categories.
B. Retailers manage merchandise groups having little experience w/ categories.
C. Vendors have superior information through their focus on a specific category and acquire insights from working with different retailers.
D. Vendors work to manage higher sales w/i their companies.
E. Retailers are traditionally poor category managers.
C
Which of the following is NOT true about a potential problem with appointing vendors as category captains?
A. Appointing vendors as category captains has its disadvantages for retailers because it makes merchandise management tasks difficult for retailers.
B. Vendors could take advantage of their position by suggesting an assortment plan that includes most of its SKUs and exclude other SKUs that contribute more so to the retailer’s profitability.
C. The vendor category captain could collude with the retailer to fix prices.
D. The vendor category captain could block other brands from access to shelf space.
E. The dependence on the vendor category captain may cause a retailer to miss opportunity for
increasing margins through their private-label SKUs.
A
A performance measure, which assesses a buyer’s performance based on the factors the buyer can control, is called the __________.
A. return on assists
B. gross margin
C. GMROI
D. net profit
E. strategic profit model
C (Buyers are responsible for only the merchandise they buy, the price at which the merchandise is sold and the cost of the merchandise, and the speed of the merchandise, so a better indicator of a buyer’s performance is GMROI.)
When there is high inventory turnover, you can expect less of a risk for markdowns b/c ___________.
A. price points had been set higher to accommodate for potential sales loss
B. there merchandise does not stay in stores for long enough to be marked down
C. buyers made poor assortment predictions
D. consumers are wary of merchandise that sits on the shelves too long
E. lower morale; associates will not want to take the markdowns
B
Which of the following is NOT a benefit to a high inventory turnover?
A. increases sales volume because new merchandise is continually available to customers, and new merchandise sells better and faster than old merchandise
B. improves salesperson morale
C. reduces obsolescence risk and markdowns
D. there are more resources available to take advantage of new buying opportunities
E. lower profit
E
Which of the following can be caused by a high inventory turnover?
A. improved employee morale
B. a decrease in the cost of goods sold
C. an increase in promotions and markdowns
D. more risk of product obsolescence
E. a decrease in profits
A
Merchandise like men’s crew socks, canned peas, college ruled loose leaf paper and 60-watt light bulbs would be considered __________.
A. expected merchandise
B. sample merchandise
C. staple merchandise
D. seasonal merchandise
E. fashion merchandise
C
The merchandise which Vivian buys tends to need continuous replenishment. What type of merchandise does she buy?
A. expected merchandise
B. sample merchandise
C. staple merchandise
D. seasonal merchandise
E. fashion merchandise
C
___________ consists of items that are only in demand for a relatively short period of time.
A. Expected merchandise categories
B. Sample merchandise categories
C. Staple merchandise categories
D. Seasonal merchandise categories
E. Fashion merchandise categories
E
Which of the following does NOT describe a fashion merchandise category?
A. It consists of items which are only in demand for a relatively short period of time.
B. New products are continually introduced into test categories.
C. The introduction of new products makes the existing products obsolete.
D. The change of colors and styles can make the basic product fashion merchandise.
E. Forecasting sales is simplistic and predictable.
E
________ categories consist of items whose sales fluctuate dramatically depending on the time of year.
A. Expected merchandise
B. Sample merchandise
C. Staple merchandise
D. Seasonal merchandise
E. Fashion merchandise
D
Garden rakes, lawn mowers, and sunscreen would be considered part of a(n) ___________.
A. expected merchandise category
B. sample merchandise category
C. staple merchandise category
D. seasonal merchandise category
E. fashion merchandise category
D
Which of the following merchandise categories is purchased similarly to fashion merchandise?
A. promotional merchandise
B. sample merchandise
C. staple merchandise
D. seasonal merchandise
E. expected merchandise
D
Which of the following is an example of staple merchandise?
A. the latest style of denim jeans
B. luggage
C. flannel sheets
D. platform shoes
E. men’s black socks
E
Which of the following is NOT true about staple merchandise categories?
A. They consist of items which are in continuous demand over an extended time period.
B. The number of new product introductions in these categories is limited.
C. The demand for these categories is predictable.
D. B/c their sales are relatively steady from day to day, periodic inventory system is used.
E. Merchandise planning systems for these categories focus on continuous replenishment.
D
Which of the following does NOT describe fashion merchandise categories?
A. Forecasting the sales for fashion merchandise categories is more challenging than forecasting for staple goods.
B. Buyers for fashion merchandise categories have much more flexibility in correcting forecasting errors.
C. They have a short life cycle.
D. Buyers often do not have a change to reorder additional merchandise after an initial order is placed.
E. New products are continuously being introduced.
B
What is the 1st step in merchandise management planning?
A. developing a forecast for sales
B. execution of the plan
C. develop a business plan
D. determine the appropriate inventory levels
E. penetrating a pricing strategy
A
Which of the following describes a forecasting approach for staple merchandise categories?
A. Buyers need to find out what customers are going to want in the future.
B. Forecasts are typically based on extrapolating historical sales.
C. Buyers for these categories rely heavily upon forecast services.
D. Buyers for these categories conduct focus group studies to find out consumers’ opinions.
E. Buyers for these categories depend upon category sales forecasts which vendors provide.
B
buyer for men’s underwear category tries to project units of sales for next year based upon historical
data. The buyer believes that the planner will keep the inventory in stock better this year by size and color, reducing the amount of stock outages from last year. Because of this predicted better in stock position, the buyer forecasts that there will be 4% growth in sales this year over last year. Last year 120,000 units were sold. Assuming that the other factors affecting men’s underwear sales last year will be the same, what will be the unit sales projection for this year?
A. 120,400
B. 122,400
C. 124,000
D. 124,800
E. 168,000
D
When marketers will ask questions and seek opinions of consumers about products form a group of teenagers, this would be an example of a(n) ____________.
A. focus group
B. on-site surveying tool
C. source of secondary information
D. mall intercept participant
E. category consultant
A
Which of the following best describes variety?
A. product availability
B. inventory that results form a replenishment process
C. the % of demand for a particular SKU that is satisfied
D. the number of SKUs in a store
E. the number of different merchandising categories w/i a store
E
Father Christmas is a retail store in Georgia that sell one-of-a-kind Santas made from fur, wool, and tapestry. This is all the store sells. The store has no product breadth, also called _________.
A. category
B. assortment horizontal integration
C. medley
D. merchandise mixtures
E. variety
E
________ of a retailer’s merchandise is the number of SKUs w/i a category.
A. merchandise breadth
B. horizontal integration
C. variety
D. assortment
E. merchandise mixture
D
________ of a retailer’s merchandise is the number of different merchandise categories offered.
A. merchandise depth
B. horizontal integration
C. variety
D. assortment
E. merchandise mixture
C
Which of the following statements about assortment is NOT true?
A. The number of SKUs to offer in a merchandise category is strategic decision.
B. The breadth and depth of the assortment in a merchandise category can affect the retailer’s brand
image.
C. Consumers want to have unlimited choices in merchandise.
D. Customers buy more if there are modest reductions of redundant items in assortments.
E. Buyers need to consider the degree to which categories in a department complement each other.
C
Which of the following statements does NOT describe trade-offs that buyers should consider for merchandise assortment planning?

A. Increasing sales by offering more breadth and depth can potentially reduce inventory turnover.
B. Increasing sales by offering more breadth and depth can potentially reduce GMROI by stocking
more SKUs.
C.Increasing breadth and depth can increase the need to put more merchandise on sale and thus
negatively affect the gross margin.
D. Multichannel retailers offer a greater variety through their Internet channels than they do in their stores.
E. The more SKUs offered, the greater chance of breaking sizes-running out of a specific size SKU.

D
Which of the following is defined as the % of demand for a particular SKU that is satisfied?
A. Assortment
B. Economic order quantity
C. Merchandise mix
D. Product availability
E. Variety
D
_____________ is the % of demand for a particular SKU that is satisfied.
A. Product assortment
B. Product availability
C. Product satisfaction
D. Product depth
E. Product breadth
B
Father Christmas is a retail store in Georgia that sells one-of-a-kind Santas made from fur, wool, and tapestry. If 150 customers wish to buy Santas from this store, and it sells 120 before running out of stock, what is its service level?
A. 15 percent
B. 80 percent
C. 20 percent
D. 85 percent
E. 88 percent
B
Which of the following statements does NOT describe the relationship between product availability and stock level?

A. The higher the product availability, the greater the amount of backup stock.
B. The higher service level that a retailer tries to achieve, then the greater the amount of buffer stock to
avoid stockouts on a particular SKU.
C. If product availability is high, the retailer will increase inventory turnover.
D. If the product availability sets too high, scarce financial resources will be wasted on needless inventory that could be more profitably invested in more variety or assortment.
E. A very high level of product availability results in a prohibitively high inventory investment.

C
Which of the following factors does NOT contribute to the increase of buffer stock level?
A. The high service level that a retailer tries to achieve
B. High fluctuations in demand
C. Long lead time for delivery from the vendor
D. Fluctuations in vendor lead time
E. Frequent store deliveries
E
How do buying staple merchandise categories differ from buying fashion merchandise categories?
A. Buyers forecast sales at the category level for staple merchandise.
B. Standard statistical techniques are used when buying fashion merchandise categories.
C. Monitoring sales and generating replacement orders with continuous replenishment is used for staple merchandise.
D. The staples buying system requires more experienced buyers.
E.Buyers for Tommy Hilfiger use the staple merchandise buying system as they know what sells well based upon the designer’s history.
C
Which of the following consists of many SKUs w/o a sales history?
A. fashion merchandise management system
B. assortment driven management system
C. historical precedence management system
D. staple merchandise management system
E. allocated space management system
A
Since sales and the arrival of merchandise from vendors can’t be predicted with perfect accuracy, retailers have to carry ____________.
A. backup stock
B. extra stock
C. cushion stock
D. cycle stock
E. base stock
A
_________ is inventory for which the level goes up and down in response to the replenishment process.
A. Cycle stock
B. Backup stock
C. Basic stock
D. EOM stock
E. BOM stock
A
Which of the following statements does NOT describe the approach which deals with cycle (base) stock?
A. A retailer tries to reduce the base stock to keep its inventory investment low.
B. One approach for reducing the base stock is to reorder and receive merchandise from the vendor more often.
C. More frequent orderings with smaller quantities will reduce transportation costs.
D. Shorter delivery time from the vendor will reduce the level of base stock.
E. Shorter order lead time from the vendor will reduce the level of base stock.
C
A catalog retailer of kitchen items that sells aluminum muffin pans has found that some weeks it sells 40 pans, and other weeks it sells none. A reorder can take up to three weeks. The probability of running out of pans and alienating its customers can be alleviated by maintaining _______.
A. non-ledgered stock
B. cycle stock
C. hidden inventory
D. backup stock
E. lead stock
D
Which of the following is NOT a factor that determines the level of required backup stock?
A. the product availability the retailers wish to provide
B. the more fluctuation in demand the more backup stock is needed
C. lead time from the vendor
D. fluctuations in lead time
E. price of the product
E
In staple merchandise management systems, orders are generated by a computer system and transmitted directly to vendors using EDI, so why would a buyer or inventory planner be necessary?
A. A buyer/inventory planner would need to monitor Strategic Profit Model results.
B. A buyer/inventory planner could alter prices.
C. A buyer/inventory planner could change assortments mid-season.
D. A buyer/inventory planner would need to make adjustments for promotions and other external
influences.
E. A buyer/inventory planner needs to monitor daily performances.
D
The percentage of complete orders received from a vendor is called _____.
A. product availability
B. order rate
C. fill rate
D. service level
E. delivery rates
C
The ___________________ provides the information needed to determine how much to order and when to place orders for SKUs to be replenished.
A. inventory management report
B. fashion buying system
C. periodic inventory control system
D. perpetual inventory control system
E. automatic ordering report
A
In staple merchandise management systems, the __________ is the amount of inventory below which the quantity available shouldn’t go or the item will be out of stock before the next order arrives.
A. order quantity
B. order point
C. EOM inventory
D. BOM inventory
E. average inventory
B
__________ is the amount of time between the recognition that an order needs to be placed and the point at which the merchandise arrives in the store and is ready for sale.
A. Lead time
B. Order time
C. Fill rate
D. Service level
E. Delivery rate
A
The ________ inventory system takes into account the outgoing sales and the incoming merchandise to indicate an accurate inventory at the end of each day.
A. perpetual
B. periodic
C. on demand
D. physical
E. static
A
The merchandise budget plan specifies _______.
A. specific assortment of SKUs to buy
B. the planned inventory investment in a fashion merchandise category for a selling season
C. the inventory that fluctuates due to the replenishment process
D. multi store allocation of merchandise
E. automatic ordering back to the vendor
B
What is the record-keeping system that allows buyers to keep track of how much they purchased each month so they can keep their merchandise budget plan in line with actual purchases?
A. aggregated budgeting
B. fashion-oriented bookkeeping
C. open-to-buy
D. open stock buying
E. trend buying
C
The purpose of an open-to-buy system is to ________.
A. avoid seasonal buying
B. maintain a steady average inventory
C. record how much is spent each month and how much is left to spend
D. decrease operating expenses
E. develop monthly trends for sales forecasting
C
After developing a plan for managing merchandise within a category, the next step in the merchandise management system process is to ________.
A. allocate the merchandise to the stores
B. make the purchase
C. order through vendors
D. re-evaluate the plan using last year’s plan
E. sell the GMM and the DMM on the plan
A
After developing a plan and allocating the merchandise, the next step in the merchandise planning process involves _______.
A. replenishing the inventory levels
B. planning for the following season
C. analyzing the performance and making adjustments
D. discussing buybacks with the vendors
E. negotiating with the GMM and DMM for open to buy money
C
Which of the following analyses compares actual to planned sales so buyers know to buy more merchandise or markdown existing merchandise?
A. sell-through analysis
B. GMROI
C. ABC analysis
D. inventory turnover analysis
E. multiattribute analysis
A
The _____ is a method of rank-ordering SKUs based upon performance measures, to make inventory stocking decisions.
A. product rating system
B. sell-through analysis
C. inventory turnover ranking
D. GMROI
E. ABC analysis
E
Often retailers find the 80-20 principle evident within the ABC analysis. What does this mean?
A. about 20 percent of a retailer’s sales promotion sold 80 percent of its inventory
B. approximately 20 percent of a retailer’s sales came from 80 percent of its products
C. approximately 80 percent of a retailer’s inventory was sold, and 20 percent was shrinkage
D. 80 percent of the retailer’s customers were repeat customers, and only 20 percent were new
E. approximately 80 percent of a retailer’s sales came from 20 percent of its products
E
The multiattribute analysis method uses a weighted average to ________.
A. determine the best discount methodology
B. assess transportation costs
C. determine inventory needs
D. calculate the cost of doing business
E. evaluate vendors
E
A vendor analysis that uses a weighted average to evaluate vendors is a ____.
A. sell-through analysis
B. GMROI
C. ABC analysis
D. inventory turnover analysis
E. multiattribute analysis
E
Allocating merchandise to stores is based upon all BUT the following decisions:
A. how much merchandise to allocate to each store
B. what type of merchandise to allocate
C. when to allocate the merchandise to different stores
D. where the merchandise was produced
D
What information would a planner use to make an allocation decision?
A. store hours
B. geodemographics
C. geocensus
D. exocensus
E. service region per distribution center
B

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