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

EOQ = √(2DS/H) = √(2 × 10,000 × 50 / 2) = √500,000 ≈ 707 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

Lot-for-lot orders exactly the quantity needed to meet net requirements each period, avoiding excess inventory for items with irregular demand.

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

In a two-bin system, opening (emptying) the first bin signals the need to reorder; the second bin contains enough stock to cover demand during replenishment lead time.

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

VMI transfers replenishment responsibility to the supplier, who uses shared data to optimize inventory levels, reducing stockouts and administrative costs for the buyer.

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

Ordering cost (or procurement cost) includes all expenses associated with placing a single order, such as processing, receiving, and inspection, independent of quantity.

(CPIM) Certified in Planning and Inventory Management Practice Test

(CPIM) Certified in Planning and Inventory Management Practice Test

CPIM Inventory Planning & Control Strategies 4