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

Higher demand variability creates greater uncertainty, requiring more safety stock to maintain a given service level.

Question 2

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

Accepted Answer

LIFO

Answer

LIFO (Last In, First Out) assumes the most recently purchased items are sold first, assigning their costs to COGS.

Question 3

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

Accepted Answer

When the first bin is emptied

Answer

In a two-bin system, emptying the first bin triggers an order; the second bin provides stock during the replenishment lead time.

Question 4

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

Accepted Answer

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

Answer

Shrinkage refers to the unexplained reduction in inventory resulting from theft, damage, spoilage, or administrative error.

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

Postponement delays final product customization or configuration until actual customer demand is known, reducing finished goods inventory risk.

(CPIM) Certified in Planning and Inventory Management Practice Test