CPM CPM Inventory and Materials Management 2

Question 1

Which of the following best describes 'carrying cost' of inventory?

Accepted Answer

Expenses associated with holding inventory over time, including storage and obsolescence

Answer

Carrying (or holding) costs include storage, insurance, obsolescence, and the opportunity cost of capital tied up in inventory.

Question 2

In materials management, what does MRP stand for?

Accepted Answer

Material Requirements Planning

Answer

MRP (Material Requirements Planning) is a system that calculates the materials and components needed to manufacture a product.

Question 3

What is the purpose of a 'physical inventory count'?

Accepted Answer

To verify that recorded inventory quantities match actual on-hand stock

Answer

A physical inventory count reconciles the actual quantities on the shelf with what is recorded in the inventory management system.

Question 4

Which metric measures how many times inventory is sold and replaced over a given period?

Accepted Answer

Inventory turnover ratio

Answer

The inventory turnover ratio indicates how efficiently inventory is managed by showing how often it is sold and restocked within a period.

Question 5

What is 'consignment inventory' in a purchasing context?

Accepted Answer

Inventory held by the buyer but owned by the supplier until it is used or sold

Answer

Consignment inventory remains the supplier's property until the buyer uses it, reducing the buyer's upfront capital investment.

CPM - Certified Purchasing Manager Practice Test