CIM Inventory Costing & Valuation Flashcards
6 cards from real CIM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CIM Inventory Costing & Valuation flashcards as text
What does Days Inventory Outstanding (DIO) represent?
Answer: Average days inventory is held before being sold
DIO (Average Inventory ÷ COGS × 365) measures how many days on average a company holds inventory before converting it to a sale.
Which category of inventory cost includes warehousing rent, insurance, and obsolescence?
Answer: Carrying cost
Carrying costs (holding costs) encompass all expenses incurred to store and maintain inventory, including rent, insurance, handling, and opportunity cost.
What is the primary purpose of standard costing in inventory management?
Answer: To set predetermined cost benchmarks for budgeting and variance analysis
Standard costing establishes pre-set cost targets that are compared with actual costs to identify and investigate variances for management action.
In inventory accounting, 'shrinkage' refers to:
Answer: Physical inventory loss due to theft, damage, or recording error
Inventory shrinkage is the discrepancy between recorded inventory quantities and actual physical counts, caused by theft, spoilage, damage, or administrative error.
Which of the following is an example of an ordering cost?
Answer: Purchase order processing fees
Ordering costs are incurred each time a purchase order is placed and include administrative processing, communication, and receiving inspection expenses.
Fill rate in inventory management measures:
Answer: Proportion of orders fulfilled immediately from available stock
Fill rate is the percentage of customer orders that can be fully satisfied from on-hand inventory without backorders or lost sales.