CPIM Inventory Management 2

Question 1

Which inventory cost is incurred regardless of whether items are ordered or held?

Accepted Answer

Fixed cost

Answer

Fixed costs do not vary with order quantity or inventory level and are incurred regardless of inventory decisions.

Question 2

A company has average inventory of $500,000 and annual cost of goods sold of $3,000,000. What is the inventory turnover ratio?

Accepted Answer

6

Answer

Inventory turnover = COGS / Average Inventory = $3,000,000 / $500,000 = 6.

Question 3

What is the primary purpose of a min-max inventory system?

Accepted Answer

To trigger replenishment when stock falls to the minimum level

Answer

In a min-max system, when inventory drops to the minimum (reorder point), an order is placed to bring stock back to the maximum level.

Question 4

Which ABC classification category typically represents the largest number of SKUs but the lowest total value?

Accepted Answer

C items

Answer

C items represent roughly 50% of SKUs but only about 5% of total inventory value.

Question 5

What does 'days of supply' measure in inventory management?

Accepted Answer

How many days the current inventory will last at current demand rates

Answer

Days of supply = On-hand inventory / Average daily demand, indicating how long current stock will last.

(CPIM) Certified in Planning and Inventory Management Practice Test