CPIM Inventory Management 3

Question 1

What is the effect of demand variability on safety stock requirements when lead time is constant?

Accepted Answer

Safety stock increases as demand variability increases

Answer

Safety stock decreases as demand variability increases

Answer

Safety stock is unaffected by demand variability

Answer

Safety stock and demand variability are inversely proportional

Question 2

Which method assigns the most recent purchase cost to cost of goods sold?

Accepted Answer

LIFO

Answer

FIFO

Answer

Weighted average

Answer

Standard cost

Question 3

In a two-bin system, what event triggers reordering?

Accepted Answer

When the first bin is emptied

Answer

When total inventory falls below the EOQ quantity

Answer

When the second bin is emptied

Answer

At fixed time intervals regardless of usage

Question 4

What is 'shrinkage' in the context of inventory management?

Accepted Answer

Unplanned loss of inventory due to theft, damage, or error

Answer

Planned reduction in inventory to reduce holding costs

Answer

Seasonal decrease in product demand

Answer

Reduction in order quantities over time

Question 5

Which of the following best describes 'postponement' as an inventory strategy?

Accepted Answer

Deferring final product differentiation until closer to customer demand

Answer

Delaying payment to suppliers to preserve cash

Answer

Postponing cycle counts to reduce labor costs

Answer

Delaying replenishment orders to reduce ordering frequency

Question 6

When calculating the reorder point with safety stock, which formula is correct?

Accepted Answer

ROP = Average demand during lead time + Safety stock

Answer

ROP = Average demand during lead time only

Answer

ROP = EOQ + Safety stock

Answer

ROP = Safety stock - Average demand during lead time

Question 7

What is the purpose of an inventory record accuracy (IRA) audit?

Accepted Answer

To verify that physical counts match recorded inventory balances

Answer

To determine the optimal reorder quantity for each SKU

Answer

To classify items by ABC category

Answer

To calculate carrying costs for the financial statements