CLP Logistics Cost Management & Financial Analysis 2 — Questions and Answers
Question 1: The inventory turnover ratio is calculated as:
- Average Inventory divided by Net Sales
- Net Sales divided by Total Inventory Value
- Cost of Goods Sold divided by Average Inventory (Correct answer)
- Total Inventory divided by Operating Costs
Correct answer: Cost of Goods Sold divided by Average Inventory
Inventory turnover = COGS / Average Inventory, measuring how many times inventory is sold and replaced during a period.
Question 2: Cost-to-serve analysis helps logistics managers primarily to:
- Negotiate lower freight rates with carriers
- Determine the true profitability of serving specific customers or channels (Correct answer)
- Calculate optimal reorder points for slow-moving items
- Benchmark warehouse costs against competitors
Correct answer: Determine the true profitability of serving specific customers or channels
Cost-to-serve analysis identifies all costs associated with specific customers or segments to determine true profitability.
Question 3: Landed cost includes all of the following EXCEPT:
- Ocean freight charges
- Customs duties and tariffs
- Retail markup applied by the buyer (Correct answer)
- Cargo insurance premiums
Correct answer: Retail markup applied by the buyer
Landed cost covers all expenses to bring goods to the destination (freight, duties, insurance, fees) but excludes the buyer's retail markup.
Question 4: Days Inventory Outstanding (DIO) measures:
- The time taken to fulfill a customer order
- The average days to collect payment from customers
- The average number of days inventory is held before being sold (Correct answer)
- The number of days inventory spends in transit
Correct answer: The average number of days inventory is held before being sold
DIO measures the average number of days a company holds inventory before it is sold, indicating inventory management efficiency.
Question 5: Return on Logistics Assets (ROLA) best measures:
- The ratio of logistics costs to total company assets
- The profitability generated relative to assets deployed in logistics operations (Correct answer)
- The amount recovered from selling obsolete logistics equipment
- The savings achieved through logistics process improvements
Correct answer: The profitability generated relative to assets deployed in logistics operations
ROLA measures how effectively logistics assets generate profit, helping evaluate the financial performance of logistics investments.
Question 6: A logistics scorecard is primarily used to:
- Rate and rank freight carriers for future contract awards
- Document warehouse capacity and storage utilization
- Track and measure key logistics KPIs against established targets (Correct answer)
- Calculate employee bonus incentives based on performance
Correct answer: Track and measure key logistics KPIs against established targets
A logistics scorecard monitors KPIs across cost, service, and quality dimensions to evaluate performance and drive improvement.
Question 7: Logistics operating margin is calculated by dividing:
- Return on logistics investment by total assets
- Net logistics profit by net logistics revenue (Correct answer)
- Inventory carrying costs by gross sales
- Total warehousing costs by total shipment volume
Correct answer: Net logistics profit by net logistics revenue
Logistics operating margin = Net Logistics Profit / Net Logistics Revenue, measuring the operational profitability of logistics activities.
CLP Logistics Cost Management & Financial Analysis 2
The inventory turnover ratio is calculated as: