Marketing Management: Marketing Management chapter 18 practice test Flashcards

1) ________ includes all the activities in selling goods or services directly to final consumers for personal, non-business use. A) Wholesaling B) Retailing C) Procurement D) Promoting E) Warehousing

2) Which of the following is true for retailing? A) Manufacturers are not considered to be retailers as they are engaged in producing the product. B) Vending machines are considered to be retailing only if they are located within stores. C) Retailing deals only with goods; it does not include services. D) Selling from a consumer's home is direct selling, but not retailing. E) Wholesalers are only considered to be retailers if they are selling to final consumers.

3) Which of the following is an example of retailing? A) Dylan's sends catalogs to retail, industrial, and institutional customers. B) SEZ U Inc. sells a limited line of fast-moving goods to small retailers for cash. C) BEL Inc. sells FMCG goods to merchant wholesalers and distributors. D) Praxis International sells products to consumers directly through the Internet. E) Hub Styles procures its raw materials directly from farmers in the region.

4) Discount stores that try to keep prices as low as possible are more likely to function using ________ operations. A) limited service B) self-selection C) full-service D) self-service E) limited-selection

5) Reynold's is a grocery chain that has always catered to mid-market customers. However, the owner, Mal, has noticed that an influx of new residents are buying mostly the lower-cost and discounted products. To attract customers, Mal decides to make a gradual switch to the discount store format, but to do this, he will have to cut costs wherever possible. Which of the following types of services should Mal avoid in order to lower costs? A) limited service B) self-selection C) full-service D) self-service E) limited-selection

6) A large staff, along with a higher proportion of specialty goods and slower-moving items and many services, are usually features of ________ retailing. A) self-service B) self-selection C) limited service D) full-service E) limited-selection

7) In ________ retailing, salespeople are ready to assist in every phase of the "locate-compare-select" process. A) self-service B) self-selection C) full-service D) limited service E) limited-selection

8) In the ________ type of retailing, customers usually find their own goods, although they can ask salespeople for assistance. A) self-service B) self-selection C) full-service D) limited service E) limited-selection

9) Which of the following is true for self-service retailing? A) They carry more shopping goods and services such as credit and merchandise-return privileges. B) This service model is favored by discount stores and customers who want to save money. C) It results in high staffing costs compared to other forms of retailing. D) Salespeople are ready to assist in every phase of the "locate-compare-select" process. E) Customers need more information and assistance than in other forms of retailing.

10) Which of the following types of retailing generally entails the highest costs? A) full-service B) self-service C) limited-selection D) limited service E) self-selection

11) Which of the following is an example of a limited-service retailer? A) Customers at TAB pick out the products they want and pay at the checkout counter. B) Salespeople at Eli are always on hand to offer shoppers advice and assistance in choosing products. C) Mina's allows customers to checkout their own purchases in order to reduce the staff count. D) As CLO's offers a number of merchandise-return privileges, customers need information and assistance while shopping. E) Alison's stocks a number of specialty products and the store's salespeople generally help shoppers with all their needs.

12) Bill and Josh are considering opening a retail store. They have identified their target market and location and are finalizing the details of the merchandise they will carry. Since the neighborhood is rundown and the customers in the area are very price-conscious, Bill and Josh want to offer goods from well-known brands, but at lower rates than the full retail prices of the products. They choose to stock excess production from manufacturers or goods that have remained unsold at other retailers. This is a description of a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) catalog

13) H&A is a retail chain that specializes in selling goods at very low prices. To achieve this, it stocks a very narrow assortment of basic necessities and offers customers a "no-frills" shopping experience. H&A is an example of a(n) ________ store. A) off-price B) specialty C) hard-discount D) superstore E) convenience

14) An example of a restaurant with a narrow and deep assortment is a ________. A) small lunch counter B) cafeteria C) large restaurant D) casual dining restaurant chain E) delicatessen

15) E&OE produces and markets its own brand of skincare products using herbal remedies and natural ingredients through standalone stores as well as an online portal. E&OE is a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) extreme value

16) Aldi, Lidl, Dollar General, and Family Dollar are examples of ________, as they carry a more restricted merchandise mix than discount stores at even lower prices. A) off-price retailers B) extreme value stores C) superstores D) convenience stores E) specialty stores

17) A factory outlet is an example of a(n) ________ retailer. A) off-price B) specialty C) discount D) department E) catalog

18) Avon, Tupperware, and Southwestern Company of Nashville are among companies in the multibillion-dollar ________ industry, which involves selling door-to-door or at home sales parties. A) direct marketing B) catalog showroom C) direct selling D) automatic vending E) buying services

19) Companies that sell products door-to-door or at home sales parties are engaging in ________. A) franchising B) network marketing C) direct-response marketing D) corporate selling E) direct marketing

20) Which of the following is an example of direct selling? A) E&OE sells its herbal skincare products exclusively through its standalone stores. B) TCJ is a telemarketing firm that sells products from a number of different suppliers. C) Jayne's sells most of its products to customers through home sales parties. D) J3 is an online shopping portal where customers can buy directly from manufacturers. E) Reynold's tries to minimize its staff costs by installing vending machines in its stores.

21) Which of the following is an example of direct marketing? A) E&OE sells its herbal skincare products exclusively through its standalone stores. B) TCJ is a telemarketing firm that sells products from a number of different suppliers. C) Jayne's sells most of its products to customers through home sales parties. D) J3 is a storeless retailer that organizes the retail activity of the employees of four firms. E) Reynold's tries to minimize its staff costs by installing vending machines in its stores.

22) The ________ marketing sales system works by recruiting independent businesspeople who act as distributors. A) catalog B) multilevel C) direct-response D) corporate E) direct

23) In ________, a salesperson goes to the home of a host who has invited friends, demonstrates the products, and takes orders. A) catalog marketing B) franchising C) direct-response selling D) network marketing E) direct marketing

24) Telemarketing is a type of ________. A) direct selling B) network marketing C) multilevel selling D) close-range marketing E) direct marketing

25) Electronic shopping is a type of ________. A) direct selling B) network marketing C) multilevel selling D) corporate selling E) direct marketing

26) A(n) ________ is a storeless retailer serving a specific clientele — usually employees of large organizations — who are authorized to buy from a list of retailers that have agreed to give discounts in return for inclusion on the list. A) direct-selling vendor B) direct marketing vendor C) buying service D) automatic vendor E) corporate retailer

27) An independent retailer using a central buying organization and joint promotion efforts with other retailers is part of a ________. A) corporate chain store B) voluntary chain C) retailer cooperative D) merchandising conglomerate E) franchise organization

28) A ________ is a retail firm owned by its customers. Members contribute money to open their own store, vote on its policies, elect a group to manage it, and receive dividends. A) retailer cooperative B) voluntary chain C) consumer cooperative D) merchandising conglomerate E) franchise organization

29) A ________ is a wholesaler-sponsored group of independent retailers engaged in bulk buying and common merchandising. A) retailer cooperative B) voluntary chain C) consumer cooperative D) merchandising conglomerate E) franchise organization

30) Which of the following is true for franchisors? A) The franchisor has to pay the franchisee to be part of the franchise system. B) The franchisor licenses the trademark from the franchisee. C) The franchisor must change its operations to suit those of the franchisee. D) The franchisor collects royalty payments from the franchisee. E) The franchisor pays startup costs for the franchisee.

31) Which of the following is true for franchisees? A) The franchisee is paid by the franchisor to be part of the franchise system. B) The franchisee licenses a trademark to the franchisor. C) The franchisee must change its operations to suit those of the franchisor. D) The franchisee collects royalty payments from the franchisor. E) The franchisee owns the trade or service mark.

32) Which of the following is a benefit of franchising for franchisees? A) The franchisee finds it easier to borrow money from financial institutions. B) The franchisee receives ownership of the franchisor's trademark. C) The franchisee must change its operations to suit those of the franchisor. D) The franchisee collects royalty payments from the franchisor. E) The franchisee is paid by the franchisor for being part of the system.

33) Jake wants to open a Subway franchise in his small town. To do this, he must pay the company a ________ fee. A) slotting B) title C) royalty D) merchandising E) residual

34) Which of the following wholesaler functions reduces inventory costs and risks to suppliers and customers? A) selling and promoting B) warehousing C) transportation D) market information E) assortment building

35) ________ includes all the activities in selling goods or services to those who buy for resale or business use. A) Retailing B) Wholesaling C) Procurement D) Promoting E) Warehousing

36) Retailing includes all the activities involved in selling goods or services directly to final consumers.

37) Full-service retailers generally have the lowest costs of all retail types.

38) Discount stores usually stock leftover goods, overruns, and irregular merchandise, sold at less than retail.

39) The network marketing sales system works by recruiting independent businesspeople who act as distributors.

40) Electronic shopping is a form of direct marketing.

41) A superstore is a storeless retailer serving a specific clientele who are entitled to buy from a list of retailers that have agreed to give discounts in return for membership.

42) A retailer cooperative is a retail firm that is owned by its customers.

43) A franchise organization is a corporate retail organization.

44) Gap and Pottery Barn are examples of franchise organizations, where two or more retail outlets are owned and controlled by a corporation that employs central buying and merchandising and sells similar lines of merchandise.

45) The franchisor owns a trade or service mark and licenses it to franchisees in return for royalty payments.

46) Corporate chain stores such as Subway, Jiffy-Lube, Holiday Inn, Supercuts, and 7-Eleven account for $1 trillion of annual US sales and 40 percent of all retail transactions.

; Application of knowledge 58) Which of the following is true for the retail industry? A) Discount stores and catalog showrooms are competing for the same customers. B) Upscale retailers see a decline in sales as middle-market retailers thrive. C) Small, specialized retailers are crowding out larger, more diverse retailers. D) Store retailing sees no competition from nonstore retailing. E) Discount stores are not doing as well as middle-market retailers.

59) Electronic shelf labeling allows retailers to ________. A) check inventory levels instantaneously B) order electronically from suppliers C) run continual promotional messages D) advertise sales and special offers E) change price levels instantaneously

60) Staples is a giant retailer that concentrates on selling office supplies. Staples is an example of a(n) ________. A) ambush marketer B) supercenter C) megamarketer D) category killer E) guerilla marketer

61) Which of the following is an example of a category killer? A) PETCO B) Walmart C) Kohl's D) The Limited E) Tesco

62) "Pop-up" stores let retailers promote brands to seasonal shoppers for a limited time.

63) Department stores only face competition from other department stores as other retailing forms are not a threat to their sales and profitability.

64) Consumers now receive sales offers through direct-mail letters and catalogs, television, cell phones, and the Internet. The nonstore-based retailers are taking business away from store-based retailers.

65) Supercenters retail grocery items as well as a huge selection of nonfood merchandise.

66) Growth in the retail market is centered firmly in the middle market, leaving luxury retailers and discounting specialists struggling.

67) As discount retailers improve their quality and image, consumers have been willing to trade down.

68) Electronic shelf labeling allows retailers to check inventory levels instantaneously.

69) Firms are increasingly recognizing the importance of influencing consumers at the point of purchase.

72) In the corporate headquarters of a supermarket chain, ________ are responsible for developing brand assortments and listening to salespersons' presentations. A) central buyers B) brokers C) specialist buyers D) agents E) specialized wholesalers

73) In supermarkets and other retail outlets, RFID is used to ________. A) change prices instantaneously B) check for spoilage or damage to goods C) advertise special offers and discounts D) run continual promotional messages E) monitor inventory and track goods

74) Which of the following is true for direct product profitability? A) It is highly correlated with the gross margin on a product. B) It is negligible compared to the gross margin on a product. C) It bears little relation to the gross margin on a product. D) It is significantly lower than the gross margin on a product. E) It is exactly the same as the gross margin on a product.

75) Mass merchandisers and discount stores typically fall into the ________ group with respect to margins and volume. A) mixed markup, high-volume B) low-volume, mixed markup C) low-volume, low-markup D) high-volume, low-markup E) high-markup, low-volume

76) A store selling expensive artwork and luxury goods typically falls into the ________ group with respect to margins and volume. A) mixed markup, high-volume B) low-volume, mixed markup C) low-volume, low-markup D) high-volume, low-markup E) high-markup, low-volume

77) Most retailers will put low prices on some items in order to increase traffic to the store. These low-priced products are known as ________. A) loss leaders B) price ceilings C) price skimmers D) price floors E) cold calls

78) American businessman King Gillette pioneered the sales model in which razor handles were given away for free or sold at a loss, but sales of disposable razor blades were very profitable. This is known as the ________ model. A) two-tiered pricing B) predatory pricing C) cross selling D) loss leading E) product churning

79) Which of the following is a prepurchase service offered by retailers? A) accepting orders over the telephone B) shipping the product C) delivery to the customer's doorstep D) general information E) interior decoration of the retail outlet

80) Which of the following is a postpurchase service offered by retailers? A) accepting orders over the telephone B) advertising and window displays C) delivery to the customer's doorstep D) general information E) interior decoration of the retail outlet

81) Which of the following is an ancillary service offered by retailers? A) accepting orders over the telephone B) advertising and window displays C) delivery to the customer's doorstep D) general information E) alterations and tailoring

82) Stores are using ________ to measure a product's handling costs from the time it reaches the warehouse until a customer buys it in the retail store. A) electronic data interchange (EDI) B) direct product profitability (DPP) C) radio-frequency identification (RFID) D) global positioning systems (GPS) E) compounded annual grown rate (CAGR)

83) In your neighborhood there is a small men's store that has a limited selection of clothing, but the selection that is carried is of very high quality and price. Services include free alterations and tailoring, personalized recordkeeping, and free dry cleaning. Inside the store are deep leather chairs and couches and thick pile carpet. Upon entering the store, a customer feels "special and rich." In terms of differentiation, what is this retailer trying to communicate by its decorations and service level? A) differentiation based on services mix and atmosphere B) differentiation based on prepurchase services C) differentiation based on postpurchase services and atmosphere D) differentiation based on ancillary services and atmosphere E) differentiation based on prepurchase and postpurchase services

84) Which of the following is the strongest differentiator for brick-and-mortar stores who want to emphasize their superiority over online retailers? A) product quality B) the shopping experience C) product range D) pricing E) the retailer's reputation

85) Retailers can target their customers more effectively by using only a single channel to reach them.

86) Featuring exclusive national brands that are not available at competing retailers is a way of generating consumer interest in a retailer.

87) In order to clearly differentiate themselves from competitors, retailers must keep merchandise and prices consistent.

88) The gross margin on a product bears a direct relation to the direct product profit.

89) Some high-volume products may have such high handling costs that they are less profitable and deserve less shelf space than low-volume products.

90) Mass merchandisers are usually high-markup, lower-volume stores.

91) Low prices on some items serve as traffic builders or loss leaders for retailers.

92) EDLP can lead to lower advertising costs and higher retail profits.

93) Accepting telephone and mail orders is an example of the ancillary services that a retailer offers.

94) Postpurchase services include shipping and delivery, gift wrapping, adjustments, and returns.

96) Skincare company E&OE retails its products through standalone stores or through its own stores within malls. The management uses this method so that customers are sure of finding only E&OE products at the stores and the brand image remains strong. In this scenario, what can E&OE do to generate consumer interest while retaining its exclusivity?

101) A brand developed by a retailer and/or wholesaler that is available only in selected retail outlets is called a ________ brand. A) generic B) franchisee C) marque D) national E) private-label

102) Though it is sold only in Walmart stores, Walmart's Ol'Roy dog food has surpassed Nestlé's Purina brand as the top-selling dog food. Ol'Roy is an example of a ________. A) generic product B) national brand C) franchise D) copy-cat brand E) private label

103) Which of the following is true for distributor brands? A) They sell at higher volumes than national brands and are also known as generics. B) They are usually sold at higher prices than national brands because production costs are higher. C) They are always of better quality than national brands as production is strictly monitored. D) Distributor brands can be sold at lower prices yet generate a higher profit margin because of their lower cost structure. E) Advertising and sales promotion costs for distributor brands are much higher than those for national brands.

104) ________ are unbranded, plainly packaged, less expensive versions of common products such as spaghetti, paper towels, and canned peaches. A) Common carriers B) Shills C) Generics D) Private labels E) Marques

105) In addition to its store brands and nationally well-known brands of detergents, Reynold's also carries much cheaper varieties of detergents that are not advertised and have little-known names. They are often manufactured from lower-quality ingredients and save on packaging and advertising costs. These are known as ________. A) common carriers B) shills C) generics D) private labels E) marques

106) Because shelf space is scarce, many supermarkets now charge a ________ for accepting a new brand, to cover the cost of listing and stocking it. A) retainer B) slotting fee C) residual fee D) contingent fee E) royalty

107) Private label or store brands are also known as generics.

108) The lower price of generics is made possible by lower-cost labeling and packaging and minimal advertising, and sometimes lower-quality ingredients.

109) The growth of "house brands" has skyrocketed in recent years. What benefits do intermediaries receive from sponsoring their own brands?

110) Supermarket chain Reynold's is considering making a switch to stocking almost exclusively private-label products in order to offer customers the lowest prices. Offer reasons why Reynold's should think twice before opting to stock exclusively private-label products.

111) Supermarket chain Reynold's is considering stocking a number of private-label products in order to offer customers the lowest possible prices. Explain how this strategy could benefit the company.

112) What should manufacturers do to compete against or collaborate with private labels?

113) Which of the following is considered a wholesaler? A) retailers B) brokers C) producers D) manufacturers E) farmers

114) ________ are independently owned businesses that take title to the merchandise they handle. They are full-service and limited-service jobbers, distributors, and mill supply houses. A) Brokers B) Agents C) Merchant wholesalers D) Specialized wholesalers E) Retailers' branches

115) ________ serve bulk industries such as coal, lumber, and heavy equipment, assuming title and risk from the time an order is accepted to its delivery. A) Producers' cooperatives B) Cash and carry wholesalers C) Truck wholesalers D) Drop shippers E) Rack jobbers

116) ________ sell and deliver a limited line of semiperishable goods to supermarkets, grocery stores, hospitals, restaurants, and hotels. A) Producers' cooperatives B) Cash and carry wholesalers C) Truck wholesalers D) Drop shippers E) Rack jobbers

117) The owner of supermarket chain Reynold's has realized that customers want a wider variety of goods than is currently available. However, Reynold's cannot afford the costs of storing excess inventory. Additionally, the owner is not willing to take the risk that the new products will remain unsold. Which of the following types of wholesalers can help Reynold's meet customer demand while minimizing costs? A) producers' cooperatives B) cash and carry wholesalers C) truck wholesalers D) drop shippers E) rack jobbers

118) Agricultural assemblers, petroleum bulk plants and terminals, and auction companies are examples of ________. A) full-service wholesalers B) specialized wholesalers C) limited-service wholesalers D) merchant wholesalers E) brokers

119) Which of the following is true of brokers? A) Brokers represent buyers or sellers on a semipermanent basis. B) Most brokers are small businesses with a few skilled salespeople. C) Brokers bring buyers and sellers together and assist in negotiation. D) Selling brokers have contractual authority to sell a manufacturer's entire output. E) Purchasing brokers make purchases for buyers and often receive, inspect, warehouse, and ship merchandise.

120) ________ refers to buying large carload lots and dividing them into smaller units before shipping them out to consumers. A) Bulk breaking B) Containerization C) Wholesaling D) Warehousing E) Broking

121) Wholesaling includes all the activities in selling goods or services to those who buy for resale or business use.

122) Wholesalers exclude manufacturers and farmers because they are engaged primarily in production, but include retailers, as they are selling to the end consumer.

123) Merchant wholesalers are independently owned businesses that take title to the merchandise they handle.

124) Why do retailers prefer to deal with wholesalers rather than directly with manufacturers?

125) JGB manufactures the K-Nine brand of dog food that is carried in supermarkets across the country. The company has always used wholesalers instead of selling directly to the retailers. However, recently, the sales team at JGB has noticed that wholesalers don't aggressively promote JGB's product line. They often don't carry enough inventory and therefore don't fill customers' orders fast enough. However, the marketing team insists that the wholesaling route is the best. What reasons can the marketing team offer to justify this?

126) Reynold's, a supermarket chain, carries the K-Nine range of dog food manufactured by JGB. However, the chain does not interact directly with JGB, but obtains stocks from wholesalers. It has been suggested that Reynold's save costs by sourcing products directly from JGB. However, Mal, the CEO of Reynold's, insists that wholesalers are the most hassle-free option for Reynold's. What can Mal say to justify this?

127) How would a merchant wholesaler operate?

128) Jayne runs a small grocery store in a small town. As there are only a few customers, the store does not require to stock goods in large quantities. Explain why sourcing products from a wholesaler will be beneficial for Jayne.

129) ShoeZone is a shoe retailer with outlets across the country. The company is trying to reduce its inventory and warehousing costs, but needs to keep delivery speeds as short as possible. What can ShoeZone do to achieve this?

130) ________ encompass sales forecasting, production planning, and inbound materials transportation. A) Market logistics B) Containerization C) Transportation D) Nonstore retailing E) Wholesaling

131) The elapsed time between an order's receipt, delivery, and payment is called the ________ cycle. A) variable-costs-to-payment B) product-to-payment C) inventory-to-sale D) order-to-inventory E) order-to-payment

132) ________ costs for a manufacturer consist of setup costs and running costs. A) Inventory-carrying B) Containerization C) Wholesaling D) Order-processing E) Transportation

133) ________ was originally pioneered by Japanese firms such as Toyota to produce goods with minimal waste of time, materials, and money. A) Electronic funds transfer (EFT) B) Market logistics C) Electronic data interchange (EDI) D) Lean manufacturing E) Supply chain management

134) As inventory draws down, management must know at what stock level to request additional stock. This stock level is called the ________. A) reorder point B) least fixed point C) point of divergence D) inflection point E) critical point

135) A stock order point of 10 means ordering the product ________. A) every 10 days B) when stock falls to 10 units C) every 10 units D) when stock falls to 9 units E) in batches of 10 items

136) Optimal order quantities exist when the curves for the order-processing cost per unit and inventory-carrying cost per unit ________. A) are collinear B) are diagonal to each other C) intersect D) are parallel to each other E) equal zero

137) E&OE is trying to minimize its inventory costs, which are extremely high. The company has realized that it can achieve this by maintaining a near-zero inventory and producing more products only once it is ordered. Which of the following is true for E&OE? A) Inventory costs are lower than order-processing costs. B) Running costs are higher than inventory-carrying costs. C) Setup costs for the products are low. D) Order-processing costs are high. E) Order-processing costs are lower than setup costs.

138) E&OE is trying to minimize its inventory costs, which are extremely high. The company has realized that it can achieve this by maintaining a near-zero inventory and producing more products only once it is ordered. Which of the following will be true for E&OE? A) Short production runs will be more expensive than longer ones. B) Setup and order-processing costs will be high. C) The order point will be high. D) Order-processing costs will be lower than the inventory-carrying costs. E) E&OE can reduce the average cost per unit by producing a long run.

139) Beyond the optimal order quantity, total cost per unit increases because ________. A) inventory-carrying cost per unit increases B) inventory-carrying cost per unit decreases C) order-processing cost per unit increases D) order-processing cost per unit increases though inventory cost decreases E) inventory-processing cost per unit falls slowly

140) An item described as low-risk and low-opportunity is a ________. A) nuisance item B) bottleneck item C) variable item D) critical item E) commodity

141) ________ consists of putting goods in boxes or trailers that are easy to transfer between two transportation modes. A) Containerization B) Haulage C) Inventory carrying D) Order processing E) Warehousing

142) Which of the following is an example of a private carrier? A) MET is a transporter that operates only in the Chicago area and charges fixed prices. B) BCL is a family firm that owns only three trucks, but takes small orders for transport. C) VTV owns a fleet of trucks and transports goods for any client for a fee. D) COM is a shipping firm that transports goods by road and rail across the United States. E) BEL Inc. manufactures parts for automobiles and transports its products to customers itself.

143) The trucking firm hired by your transportation manager provides a trucking service between the city of Sacramento and the surrounding towns on a regular schedule and at fixed prices. The trucking firm saves transportation costs by transporting the goods using trains as well as trucks, instead of trucks alone. Your transportation manager has hired a(n) ________ carrier. A) airship B) airtruck C) trainship D) fishyback E) piggyback

144) If the shipper owns its own truck or air fleet, it becomes a ________ carrier. A) containerized B) private C) contract D) common E) diversified

145) Most companies today are trying to increase the order-to-payment cycle.

146) More stocking locations mean goods can be delivered to customers more quickly, and warehousing and inventory costs are lower.

147) Inventory cost increases at an accelerating rate as the customer-service level approaches 100 percent.

148) If setup costs are high, the manufacturer can produce the item often, and the average cost per item is stable and equal to the running costs.

149) Order-processing costs must be compared with inventory-carrying costs because the larger the average stock carried, the higher the inventory-carrying costs.

150) As inventory draws down, management must know at what stock level to place a new order. This stock level is called the order point.

151) The order-processing cost per unit increases with the number of units ordered because the order costs are spread over more units.

152) Companies who want to carry near-zero inventory should build for order, not for stock.