CPIM Inventory Management and Control

Question 1

What does ABC analysis classify inventory items based on?

Accepted Answer

Annual usage value

Answer

ABC analysis classifies inventory items by annual usage value, with A items representing the highest value (roughly 80% of total value) and C items the lowest.

Question 2

In ABC analysis, which category typically represents approximately 20% of SKUs but 80% of total inventory value?

Accepted Answer

A items

Answer

A items follow the Pareto principle—roughly 20% of SKUs account for about 80% of total annual inventory value and receive the most management attention.

Question 3

What is cycle counting in inventory management?

Accepted Answer

A continuous audit where a subset of inventory is counted on a rotating schedule

Answer

Cycle counting is a perpetual auditing technique where a portion of inventory is counted regularly throughout the year rather than in a single annual physical count.

Question 4

Which inventory cost is incurred when a company cannot fulfill a customer order due to insufficient stock?

Accepted Answer

Stockout cost

Answer

Stockout costs arise when demand cannot be met due to inadequate inventory, encompassing lost sales, expediting fees, and customer dissatisfaction.

Question 5

What is the primary purpose of safety stock in an inventory system?

Accepted Answer

To buffer against demand and supply variability

Answer

Safety stock acts as a buffer to protect against unexpected increases in demand or replenishment lead time variability, reducing the risk of stockouts.

CPIM - Certified in Production and Inventory Management Practice Test

CPIM - Certified in Production and Inventory Management Practice Test

CPIM Inventory Management and Control