CLA Inventory Control 2

Question 1

What does the term 'safety stock' refer to in inventory management?

Accepted Answer

Buffer inventory kept to guard against stockouts from demand or supply variability

Answer

Stock held only for seasonal demand

Answer

Inventory reserved for quality inspection

Answer

Overstock items awaiting return to supplier

Question 2

Which inventory counting method records every transaction as it occurs to maintain a continuous, up-to-date inventory balance?

Accepted Answer

Perpetual inventory system

Answer

Periodic inventory system

Answer

Cycle count system

Answer

Annual physical count

Question 3

A warehouse notices that 10% of its SKUs account for 70% of its total inventory value. Which inventory classification does this represent?

Accepted Answer

Class A items

Answer

Class C items

Answer

Class B items

Answer

Safety stock items

Question 4

What is the primary purpose of conducting a cycle count?

Accepted Answer

To verify inventory accuracy for a subset of items on a rotating basis without halting operations

Answer

To shut down operations and recount all inventory at once

Answer

To identify obsolete inventory for disposal

Answer

To calculate reorder points for all SKUs

Question 5

Which term describes inventory that is no longer sellable or usable due to product obsolescence or expiration?

Accepted Answer

Dead stock

Answer

Safety stock

Answer

In-transit inventory

Answer

Work-in-process inventory

Question 6

A company uses the FIFO (First In, First Out) method. If older inventory costs $5/unit and newer inventory costs $7/unit, which cost is used when goods are sold?

Accepted Answer

$5 per unit, because the oldest inventory is sold first

Answer

$7 per unit, because newer stock is more current

Answer

$6 per unit, the average of both

Answer

The cost depends on which bin the goods come from

Question 7

What does 'inventory turnover ratio' measure?

Accepted Answer

The number of times inventory is fully sold and replaced over a period

Answer

The percentage of inventory damaged during handling

Answer

The ratio of safety stock to average inventory

Answer

The speed at which purchase orders are processed