CLP Inventory Control & Warehousing 4 — Questions and Answers
Question 1: Which inventory costing method assigns the most recent purchase costs to cost of goods sold during periods of rising prices?
- FIFO
- LIFO (Correct answer)
- Weighted average cost
- Specific identification
Correct answer: LIFO
LIFO (Last In, First Out) uses the newest (highest) costs for COGS, resulting in lower reported profit during inflation.
Question 2: A warehouse manager wants to reduce 'honeycombing' losses. What does honeycombing refer to?
- Damaged goods clustered in one zone
- Unused cubic space created when only some positions in a storage lane are occupied (Correct answer)
- Excessive aisle space between racks
- Inventory counted multiple times during cycle counts
Correct answer: Unused cubic space created when only some positions in a storage lane are occupied
Honeycombing is wasted storage space that occurs when partially empty lanes or slots cannot be filled by other products.
Question 3: What is the primary function of a Warehouse Management System (WMS)?
- Generating supplier purchase orders automatically
- Directing and tracking warehouse operations including receiving, putaway, picking, and shipping (Correct answer)
- Processing customer payments
- Managing carrier contract negotiations
Correct answer: Directing and tracking warehouse operations including receiving, putaway, picking, and shipping
A WMS orchestrates warehouse workflows, optimizes space use, and provides real-time visibility into inventory location and status.
Question 4: Lead time demand is used in inventory management to calculate:
- Carrying cost percentage
- The reorder point (Correct answer)
- Economic order quantity
- Annual inventory turnover
Correct answer: The reorder point
The reorder point equals average demand during lead time plus safety stock, ensuring replenishment arrives before stockout.
Question 5: Which receiving process verifies that incoming quantities match the purchase order without referencing expected quantities in advance?
- Blind receiving (Correct answer)
- Three-way matching
- Advance ship notice (ASN) receiving
- Bar-code scanning receiving
Correct answer: Blind receiving
Blind receiving requires workers to count and record actual quantities independently, preventing rubber-stamping of expected amounts.
Question 6: What is the purpose of a 'put-away' process in warehouse operations?
- Consolidating outbound shipments
- Moving received goods to their designated storage locations (Correct answer)
- Inspecting returned merchandise for resale
- Staging orders at the shipping dock
Correct answer: Moving received goods to their designated storage locations
Put-away moves inbound products from the receiving area to assigned storage locations per the WMS or slotting plan.
Question 7: Which inventory metric indicates how many times inventory is sold and replaced over a given period?
- Days on hand
- Inventory turnover ratio (Correct answer)
- Fill rate
- Carrying cost ratio
Correct answer: Inventory turnover ratio
Inventory turnover (Cost of Goods Sold ÷ Average Inventory) measures how efficiently inventory is being converted into sales.
CLP Inventory Control & Warehousing 4
Which inventory costing method assigns the most recent purchase costs to cost of goods sold during periods of rising prices?