CIM Inventory Control & Stock Replenishment 3

Question 1

A company orders 2,400 units annually, has an ordering cost of $50 per order, and a holding cost of $2 per unit per year. What is the EOQ?

Accepted Answer

346 units

Answer

EOQ = √(2 × 2,400 × $50 / $2) = √(240,000 / 2) = √120,000 ≈ 346 units.

Question 2

What is 'phantom inventory' in the context of retail stock management?

Accepted Answer

Items that appear available in the system but are physically missing or mislocated

Answer

Phantom inventory refers to items shown as in-stock in the system but unavailable on the shelf due to theft, damage, or misplacement.

Question 3

Which inventory metric measures how many times inventory is sold and replaced over a specific period?

Accepted Answer

Inventory turnover ratio

Answer

Inventory turnover = Cost of Goods Sold / Average Inventory, measuring how frequently inventory is sold and replenished.

Question 4

In a periodic review (P) system, what happens at each review interval?

Accepted Answer

An order is placed to bring inventory up to a target level

Answer

In a periodic review system, at each fixed review interval an order is placed to bring inventory up to a predetermined target (order-up-to) level.

Question 5

What does 'obsolescence risk' primarily influence when setting safety stock levels?

Accepted Answer

Higher obsolescence risk favors lower safety stock levels

Answer

Items with high obsolescence risk should carry lower safety stock because holding excess inventory increases the chance it becomes unsellable.

(CIM) Certified Inventory Manager Practice Test