CLA Inventory Control 3

Question 1

Which of the following best describes the Economic Order Quantity (EOQ) model?

Accepted Answer

The order quantity that minimizes total ordering and holding costs

Answer

EOQ is the formula-derived order quantity that balances ordering costs and inventory holding costs to minimize total expense.

Question 2

What is 'lead time' in the context of inventory replenishment?

Accepted Answer

The time between placing an order and receiving the goods

Answer

Lead time is the elapsed time from when a purchase order is placed until the inventory arrives and is ready to use.

Question 3

A distribution center implements a min-max inventory system. What does the 'min' level represent?

Accepted Answer

The stock level that triggers a replenishment order

Answer

In a min-max system, the minimum level is the reorder point — when inventory drops to this level, a replenishment order is placed.

Question 4

Which inventory valuation method assumes the most recently purchased items are sold first?

Accepted Answer

LIFO

Answer

LIFO (Last In, First Out) assumes the most recently acquired inventory is sold or used before older stock.

Question 5

What is a primary disadvantage of carrying excess inventory?

Accepted Answer

It increases holding costs such as storage, insurance, and obsolescence risk

Answer

Excess inventory ties up capital and incurs holding costs including warehousing, insurance, spoilage, and the risk of obsolescence.

(CLA) Certified Logistics Associate Practice Test