CCS Inventory Management & Supply Chain 2 — Questions and Answers
Question 1: Which inventory costing method assumes the most recently purchased items are sold first?
- FIFO
- LIFO (Correct answer)
- Weighted average
- Specific identification
Correct answer: LIFO
LIFO (Last-In, First-Out) assumes the newest inventory is sold first, which can lower taxable income during periods of rising prices.
Question 2: A food manufacturer's supplier fails to deliver a key ingredient on time, forcing a production halt. This is best described as:
- Demand variability risk
- Supply chain disruption (Correct answer)
- Inventory shrinkage
- Reorder point error
Correct answer: Supply chain disruption
A supply chain disruption occurs when upstream failures prevent timely delivery of inputs needed for production.
Question 3: Which metric measures the number of times inventory is sold and replaced over a given period?
- Days sales outstanding
- Inventory turnover ratio (Correct answer)
- Gross margin return on inventory
- Economic order quantity
Correct answer: Inventory turnover ratio
Inventory turnover ratio = Cost of Goods Sold ÷ Average Inventory, indicating how efficiently stock is moving.
Question 4: In a food service context, 'perpetual inventory' refers to:
- Counting stock once per year
- Continuously updating inventory records with each transaction (Correct answer)
- Ordering the same amount every period
- Keeping a fixed safety stock level
Correct answer: Continuously updating inventory records with each transaction
Perpetual inventory systems update records in real time with every purchase, use, or waste event.
Question 5: Cross-docking in a food supply chain primarily serves to:
- Increase safety stock levels
- Eliminate or minimize warehousing by transferring product directly to outbound transport (Correct answer)
- Reduce supplier lead times through better forecasting
- Automate receiving inspections
Correct answer: Eliminate or minimize warehousing by transferring product directly to outbound transport
Cross-docking transfers incoming shipments directly to outbound vehicles with little or no storage time, reducing handling and storage costs.
Question 6: Which of the following best defines 'lead time' in procurement?
- Time between placing an order and receiving it (Correct answer)
- Time between production and shelf placement
- Shelf life minus days on hand
- Time needed to complete a physical inventory count
Correct answer: Time between placing an order and receiving it
Lead time is the elapsed time from when a purchase order is placed until the goods arrive and are ready for use.
Question 7: A food company uses a vendor-managed inventory (VMI) system. This means:
- The buyer tracks and orders all inventory independently
- The supplier monitors inventory levels and triggers replenishment automatically (Correct answer)
- A third-party auditor manages stock counts
- The government regulates minimum stock levels
Correct answer: The supplier monitors inventory levels and triggers replenishment automatically
In VMI, the supplier assumes responsibility for monitoring inventory and initiating replenishment orders based on agreed-upon parameters.
CCS Inventory Management & Supply Chain 2
Which inventory costing method assumes the most recently purchased items are sold first?