CPIM Inventory Planning & Control Strategies 4

Question 1

A company has annual demand of 10,000 units, ordering cost of $50 per order, and holding cost of $2 per unit per year. What is the EOQ?

Accepted Answer

707 units

Answer

500 units

Answer

1,000 units

Answer

250 units

Question 2

Which inventory replenishment strategy is most appropriate for items with highly lumpy or sporadic demand?

Accepted Answer

Lot-for-lot (LFL)

Answer

Economic Order Quantity (EOQ)

Answer

Fixed order quantity

Answer

Period order quantity (POQ)

Question 3

In a two-bin kanban system, what triggers a replenishment order?

Accepted Answer

When the first bin is emptied and the second bin is opened

Answer

When total inventory falls below the EOQ

Answer

When the review period expires

Answer

When inventory drops below safety stock

Question 4

What is the primary advantage of vendor-managed inventory (VMI)?

Accepted Answer

The supplier manages replenishment, reducing buyer administrative burden and often improving fill rates

Answer

The buyer retains full control over ordering decisions

Answer

It eliminates the need for safety stock entirely

Answer

It replaces electronic data interchange with manual processes

Question 5

Which term describes the total cost associated with placing and receiving a single purchase order, regardless of order size?

Accepted Answer

Ordering cost

Answer

Holding cost

Answer

Stockout cost

Answer

Unit cost

Question 6

A fill rate of 95% means that:

Accepted Answer

95% of demand is satisfied from stock on hand without backorders

Answer

95% of orders are delivered on time

Answer

5% of inventory is classified as safety stock

Answer

The warehouse operates at 95% capacity utilization

Question 7

Which inventory classification approach categorizes items by their criticality to operations, regardless of value or usage frequency?

Accepted Answer

VED (Vital/Essential/Desirable) analysis

Answer

ABC analysis

Answer

FSN (Fast/Slow/Non-moving) analysis

Answer

HML (High/Medium/Low) analysis