CPIM Inventory Management and Control 2

Question 1

What does EOQ stand for in inventory management?

Accepted Answer

Economic Order Quantity

Answer

EOQ (Economic Order Quantity) is the order quantity that minimizes the combined total of ordering and carrying costs.

Question 2

The EOQ formula minimizes the total of which two types of costs?

Accepted Answer

Ordering costs and carrying costs

Answer

EOQ balances ordering costs (which decrease per unit as order size grows) against carrying costs (which increase as more inventory is held), finding the quantity where their total is minimized.

Question 3

In a fixed-order-quantity (Q) system, what triggers a replenishment order?

Accepted Answer

Inventory falling to a predetermined reorder point

Answer

In a fixed-order-quantity system, a standard order for the same quantity is placed whenever the inventory level drops to the reorder point (ROP).

Question 4

What is the basic formula for the reorder point (ROP) when demand and lead time are known?

Accepted Answer

ROP = Average daily demand × Lead time + Safety stock

Answer

The reorder point equals average daily demand multiplied by lead time in days, plus safety stock to protect against variability during the replenishment period.

Question 5

Which lot sizing technique orders exactly the quantity needed to satisfy net requirements for each period?

Accepted Answer

Lot-for-Lot (L4L)

Answer

Lot-for-Lot (L4L) generates orders that exactly match net requirements period by period, producing no excess inventory and minimizing carrying costs.

CPIM - Certified in Production and Inventory Management Practice Test

CPIM - Certified in Production and Inventory Management Practice Test

CPIM Inventory Management and Control 2