CPIM Inventory Planning & Control Strategies 2

Question 1

A company notices its inventory turnover ratio has decreased from 8 to 5 over the past year. What does this most likely indicate?

Accepted Answer

Excess inventory is being held relative to sales

Answer

A declining inventory turnover ratio indicates that inventory is sitting longer before being sold, suggesting excess stock relative to demand.

Question 2

Which inventory classification method assigns items to categories A, B, or C based on annual dollar usage?

Accepted Answer

ABC analysis

Answer

ABC analysis categorizes inventory by annual dollar value, with A items representing the highest value (typically 70-80% of value from 10-20% of items).

Question 3

In a periodic review system, what is determined at each review interval?

Accepted Answer

The order quantity needed to bring inventory to a target level

Answer

In a periodic review system, the order quantity is calculated at each review period to replenish inventory up to a predetermined target or order-up-to level.

Question 4

Which cost is NOT typically included in inventory carrying costs?

Accepted Answer

Setup or ordering cost

Answer

Setup or ordering cost is an ordering cost (or production cost), not a carrying cost; carrying costs include storage, insurance, taxes, and obsolescence.

Question 5

A product has a demand of 500 units/week with a lead time of 3 weeks and a safety stock of 200 units. What is the reorder point?

Accepted Answer

1,700 units

Answer

Reorder Point = (Demand × Lead Time) + Safety Stock = (500 × 3) + 200 = 1,700 units.

(CPIM) Certified in Planning and Inventory Management Practice Test

(CPIM) Certified in Planning and Inventory Management Practice Test

CPIM Inventory Planning & Control Strategies 2